Over recent years there has been a big change in the landscape surrounding inheritance and estate planning. Unfortunately for us we are faced with declining thresholds and increasing tax rates. If we skip back a few years to 2008. A parent could pass €521,208 to each son or daughter without incurring any tax liability. The rate of tax levied above this threshold was also only 20%.

Today in 2015 we are faced with a reduced threshold of €225,000 and an increased tax rate of 33% levied on amounts in excess of the current threshold. While the above applies directly to parents, there are many relatives’ grandparents, uncles & aunties that want to make gifts to their loved ones in the most practical way possible.

However there can be some degree of concern when passing money to a child. That is why relatives want to retain control over how the money is invested, after all we all know what teenagers can be like.

Introducing the Bare Trust

What is a trust?

A trust is a legal agreement where assets are held by trustees for the benefit of one or more people.

What is a Bare Trust?

A bare trust is often used for children under the age of 18. A bare trust arises when money is added to a trust fund in the names of the trustees but is treated as legally belonging to child at all times.

Who might use a bare trust?

It can be used by clients who want to make a gift or money to children and benefit from today’s Capital Acquisition Thresholds and gift exemption.

Why use a bare trust?

Take advantage of today’s thresholds

Client selects who they want the policy to benefit

There is no need for grant of probate in the event of death. As the gift is made once the trust is complete.

Flexibility, you can choose when and how much to give.

Case Study:

John (Father) wants to set aside some money for his only son Paul. Under the threshold John can pass 225,000 tax free to his son Paul.

John is worried that by the time the inheritance transfer might take place this threshold might come down even further, leaving Paul with an increased tax liability.

John sets up a Bare Trust today and invests €225,000. John tells his wife Mary about the trust but he decides not to mention it to his son Paul. He also notifies his solicitor about the trust and through the application process his Financial Advisor also has records.

10 years have passed and unfortunately John has passed away, in the 10 year period the fund has grown to €400,000. Mary informs her son Paul about the trust. Paul is looking to but his first home and decides to encash the trust.

Paul realises that as the Bare trust was set up under prior thresholds that there is no tax liability present in excess of what is now a €150,000 threshold limit.  Paul is able to encash the €400,00 and he is not liable for CAT.


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