Does joint account rule out tax exempt small gift for son-in-law?

Q&A: Dominic Coyle

 

I’m a widow and I’d like to gift my daughter €3,000 every year under the small gift exemption. I would also like to gift the same amount to her husband, my son-in-law, but they only have a joint bank account in both of their names.

Can I gift the €3,000 to my son-in-law if it is going into his joint account that he owns with my daughter, or does his account have to be in his name only for me to make this gift?

Ms K.D., email

The only concern the Revenue has is that the gifted money should be for the use of the person to whom it is gifted. The typical scenario is where a parent gifts money to a sibling or a child that is then transferred on to another brother or sister, or a parent. Effectively, the gift is only passing through the account of the person nominated and is not really for them.

In that case, the ultimate beneficiary is getting more than €3,000 tax free from you without it being taken into account for tax purposes.

But that should not concern you in the circumstances you outline. You are gifting each of your daughter and son-in-law €3,000 and it just happens that they have a joint bank account. There’s no problem with that – a lot of couples these days operate out of joint accounts. In fact, many mortgage lenders insist on joint accounts for the purposes of paying off home loans and couples often do not want the hassle of operating multiple current accounts.

And, of course, many couples will make joint buying decisions on big issues – home decor or furniture, holidays and the like – and there’s nothing wrong with that either. It certainly would not invalidate the tax exemption on the sums you are talking about.

The thing to remember is that Revenue’s focus is on abuse; they’re not looking simply to catch people out for acting in good faith.

Now, if your daughter had a debt in her own name and both her own gift and the money given to your son-in-law went to pay it down, that might arouse the interest of Revenue but, in general, there’s nothing to stop you making these gifts to both.

Finally, for clarity, even if Revenue did have evidence that both sums were for your daughter’s use, any tax that did fall due would be an issue for her, not you.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.

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