Bare Trusts in Ireland: Saving for Your Children and Grandchildren
The question comes up in nearly every family meeting we sit in on. What is the best way to put money aside for the kids or the grandkids without handing a slice of it to Revenue later on?
Most of the time the answer is a bare trust. It lets you use the €3,000 small gift exemption and it keeps the money and all the growth on it outside the child's future inheritance tax threshold. There is one catch and I will come to it but it is a good deal.
If you are a grandparent, pay closer attention than the parents do. Your case is the stronger one and most people have no idea why.
The €3,000 rule and what people get wrong about it
Any person can give any other person €3,000 in a calendar year and no Capital Acquisitions Tax arises. Per giver, per recipient, per year.
What people get wrong is treating it as a household allowance. It is not. Two parents do not have €6,000 between them. They have €3,000 each and each gift has to come out of that person's own resources. Same for grandparents.
Add it up and one child can take:
€6,000 a year from two parents
€12,000 a year from four grandparents
€18,000 a year if everyone gets involved
None of that touches the child's lifetime threshold and none of it goes near a Revenue return. It does not have to be a lump sum either. A standing order of €250 a month does exactly the same job.
One condition and it is absolute. The money has to actually move. Minding it for them in your own account does not count.
Why grandparents should be paying more attention than parents
Parents and grandparents sit in different CAT groups, and the gap is not small.
| Parent to child | Grandparent to grandchild | |
|---|---|---|
| Lifetime threshold | €400,000 (Group A) | €40,000 (Group B) |
| Small gift exemption | €3,000 per parent, per year | €3,000 per grandparent, per year |
| Typical annual total | €6,000 from two parents | €12,000 from four grandparents |
| Tax above the threshold | 33% | 33% |
| Shared with | Both parents | Every Group B relative, aunts and uncles included |
A child has €400,000 to work with. A grandchild has €40,000 and they are sharing it with every aunt and uncle who might leave them something.
So leave a grandchild €100,000 in your will and most of it is taxable. Move the same €100,000 across in €3,000 instalments while you are alive and none of it is. Same money, same people but a completely different outcome.
Why a trust and not just a bank account
Nobody under 18 can hold an investment in their own name which is where most of these conversations stall. A bare trust gets around it. You are the trustee, the child is the beneficial owner and the money is held for them until they turn 18.
Grandparents can act as trustees themselves or appoint the child's parents. I would usually suggest the parents, purely on practical grounds. They will be around and they are the ones who will end up dealing with it.
Most life companies have templated bare trust documentation that sits on top of a regular savings plan which keeps the paperwork and the cost down. You can use a deposit account or hold investments directly instead but you will need a solicitor to draft the trust deed and that changes the maths at small monthly amounts.
Two parents, starting from birth
€6,000 a year from birth to 18, growing at 5% a year net of charges, comes to roughly €175,000. Close to €70,000 of that is growth.
The money belonged to the child from the day it went in, so the growth is theirs too. Not a cent of it touches the €400,000 Group A threshold.
Save the same money in your own name and hand it over at 21, and the full €175,000 comes off their threshold. Same discipline, same fund, and €175,000 of their allowance gone for no reason at all.
Two grandparents, starting at age five
€6,000 a year from age five to 18, at 5% net of charges, gets you to around €112,000, with roughly €34,000 of that being growth.
Leave that same €112,000 in your will instead and, after the €40,000 Group B threshold, €72,000 is taxable at 33%. A CAT bill of just under €24,000, payable by an 18-year-old who may well have to sell the asset to fund it.
Through the bare trust there is nothing to declare and nothing to pay.
And before anyone asks, because older clients always do, the two-year rule does not undo this. A gift made within two years of your death is normally re-characterised as an inheritance, but section 69(3) of the Capital Acquisitions Tax Consolidation Act 2003 specifically protects the small gift exemption in that situation. The €3,000 stands.
The tax, as it stands in 2026
The wrapper matters here more than most people expect.
Life assurance savings plan: exit tax at 38%, down from 41% for chargeable events on or after 1st of January 2026 under Finance Act 2025. Deemed disposal still bites every eight years (Subject to change). The life company deducts and pays it so there is no return for you to file. A 1% government levy applies to premiums.
Deposit account: DIRT at 33% on the interest.
Investments held directly under trust: CGT at 33%, with the child's own €1,270 annual exemption and the ability to offset losses. No deemed disposal.
Over eighteen years the direct route usually comes out ahead on tax alone. The life assurance route wins on cost, simplicity and documentation, and at €250 or €500 a month that generally decides it. There is no universally right answer here. It comes down to the amount and to how much administration you are willing to live with.
A trap grandparents walk into
Parents can pay for a child's support, maintenance and education and no CAT arises. That is section 82. Grandparents generally cannot and these catches people out.
Finance Act 2014 narrowed the exemption to the disponer's own children. So a grandparent writing a cheque for school fees or college costs is making a gift rather than an exempt payment unless they stand in loco parentis. With only €40,000 of a threshold to work with, a few years of fees does real damage.
If you want to help with education, use the €3,000 exemption each year, or gift to the child's parents instead, where a €400,000 Group A threshold gives you far more room. Either beats writing the cheque straight to the school.
The catch, and it is a real one
Eighteen. That is the catch.
The trust falls away and your child or grandchild is absolutely entitled to the fund. You cannot attach conditions, you cannot change the beneficiary and you cannot take it back. That is precisely what makes it work for tax and it is the one thing to be honest with yourself about before you start.
In practice, most 18-year-olds do not know the plan exists and the ones who do tend to understand what it is for. Plan for the child you might have at 18, not the one in front of you now.
One more thing on that. If the child dies before 18, the fund forms part of their estate. It does not come back to you.
Does Revenue need to know?
No. Gifts inside the €3,000 exemption are ignored completely for CAT and there is no return to file. A return only arises once cumulative benefits within a group pass 80% of the threshold, which is €320,000 in Group A and €32,000 in Group B.
Keep an eye on that €32,000 figure if grandparents have been generous beyond the exemption. It arrives sooner than people expect.
When I would tell you not to bother
If you want to keep control of the money, do not do this. Invest in your own name and gift it when you are ready.
If you are funding a future gift tax bill on something larger, a farm, a business, a property, then a Section 73 policy is the right tool instead. It has to be set up as one from day one and funded for at least eight years, so it is a decision to make early rather than late.
A bare trust is for regular, long-term saving where you are genuinely content that the money is theirs.
Frequently asked questions
How much can grandparents gift a grandchild tax free in Ireland?
€3,000 per grandparent per grandchild per calendar year under the small gift exemption. That is €6,000 from one set of grandparents and €12,000 where all four contribute. Anything above that comes off the grandchild's €40,000 Group B threshold.
Can grandparents set up a bare trust for a grandchild in Ireland?
Yes. The grandparent makes the gift and can act as trustee or appoint the child's parents instead. The grandchild is the beneficial owner and becomes absolutely entitled at 18.
Can I take money back out of a bare trust?
Not for your own benefit. Once the gift is made the money belongs to the child. Funds can only be applied for their benefit and in practice most families leave the plan invested until 18.
Is a bare trust better than a children's savings account?
For short-term saving a deposit account is fine. Over ten years or more, deposit interest taxed at 33% DIRT will struggle to keep pace with inflation, which is why an invested bare trust is usually the better fit.
Talk to us
Whether you are a parent starting from the maternity ward or a grandparent wondering what you can do now rather than in your will, this works best inside a wider family plan rather than as a product bought on its own. If you would like to see what it would look like for your family, come and talk to us.
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This article is for general information only and does not constitute financial, tax or legal advice. Tax treatment depends on individual circumstances and may change. Financial Planning Matters is regulated by the Central Bank of Ireland.