GET A HAND­OUT

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

Many chil­dren have turned to their par­ents for help with the house de­posit. “The vast ma­jor­ity of first-time buy­ers are get­ting gifts [of money] from their par­ents to­wards the de­posit,” said Grant. “I’ve seen cases where some of the gifts are for the full de­posit.”

Should you be get­ting a gift of money to­wards your de­posit, all lenders now re­quire you to have a gift let­ter from the donor. That let­ter spec­i­fies the sum of money be­ing gifted, the name of the donor, and a sig­na­ture from the donor con­firm­ing that you do not need to re­pay the money gifted — and that the donor has no re­course to the prop­erty.

There may be tax im­pli­ca­tions if you re­ceive a hand­out from your par­ents to­wards your de­posit. You must typ­i­cally pay gift or in­her­i­tance tax at a rate of 33pc on the value of any gifts or in­her­i­tances re­ceived — though there are cases where there are ex­emp­tions from the tax. Un­der the par­ent-tochild tax-free thresh­old for in­her­i­tance and gift tax, a child can get gifts or in­her­i­tances worth up to €310,000 tax-free from their par­ents over their life­time. A hand­out re­ceived from your par­ents to­wards your de­posit could there­fore trig­ger a tax bill for you if that hand­out pushes the to­tal value of the gifts and in­her­i­tances re­ceived from your par­ents over that thresh­old.

To avoid hav­ing a hand­out trig­ger a tax bill, ask your par­ents to work within the small gift ex­emp­tion. With that ex­emp­tion, each par­ent can give a gift to a value of €3,000 to a child (or to any­one else) each year with­out trig­ger­ing gift tax. So two par­ents can make tax-free gifts to a child to the value of €6,000 in any year. In­deed, two par­ents could gift €12,000 in to­tal each year to each son or daugh­ter and their re­spec­tive part­ner (such as a fi­ancee, fi­ance, daugh­ter-in-law or sonin-law) with­out trig­ger­ing tax. So should you be buy­ing a home with a part­ner or hus­band, un­der the small gift ex­emp­tion, you and your part­ner could re­ceive €12,000 in to­tal a year tax-free from your par­ents to­wards the de­posit on your home.

Gifts which qual­ify for the small gifts ex­emp­tion do not eat into the par­ent-to-child tax-free thresh­old. Fur­ther­more, there is no obli­ga­tion to spend the gift re­ceived un­der the small gift ex­emp­tion in the year it is re­ceived. You could there­fore save that gift un­til you need it for the de­posit. Should your par­ents wish to give you a large hand­out to­wards your de­posit (such as €20,000 or more), it would be wise for them to drip-feed that hand­out over a num­ber of years so that the small gift ex­emp­tion could be fully taken ad­van­tage of and no tax bill would be trig­gered. pays bet­ter in­ter­est than nor­mal. Reg­u­lar sav­ings ac­counts typ­i­cally pay bet­ter in­ter­est than lump sum de­posit ac­counts — as long as you choose an ac­count which pays more than 1pc in­ter­est.

Some of the best reg­u­lar sav­ings ac­counts are EBS’S Fam­ily Sav­ings (which pays 1.75pc in­ter­est in the first year), KBC’S Bonus Reg­u­lar Saver (1.5pc in­ter­est on up to €50,000 of sav­ings) and Bank of Ire­land’s Mort­gage Saver (1.35pc in­ter­est on up to €14,999 of sav­ings). The Mort­gage Saver ac­count also pays bonus in­ter­est of €2,000 once the buyer has more than €5,000 saved into their ac­count, though there is a catch: the mort­gage must be drawn down with Bank of Ire­land within 30 months of open­ing the ac­count. You could find a cheaper mort­gage with an­other lender.

Should you plan to save for more than five years for your de­posit, do so through a life as­sur­ance sav­ings ac­count rather than a tra­di­tional de­posit ac­count as re­turns are likely to be higher, ac­cord­ing to Eoin Mcgee, prin­ci­pal of Kil­dare-based fi­nan­cial ad­vis­ers Pros­per­ous Fi­nan­cial Plan­ning.

Some of the life as­sur­ance sav­ings plans rec­om­mended by Mcgee in­clude Zurich Life’s Easy Ac­cess Sav­ings, Aviva’s Reg­u­lar Saver and Ir­ish Life’s Pin­na­cle. Be sure to un­der­stand the charges on a life as­sur­ance plan be­fore sign­ing up to one, though.

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