Can our granddaughter be treated as our child for inheritance tax purposes?

Q&A: Informal fostering arrangements can change the tax treatment of relatives once certain conditions are observed

Myself and my husband reared our granddaughter since the day she came home from hospital. She has lived with us for more than 20 years.

We have had no support financial or otherwise from her father, mother or other grandparents. We did receive child benefit until she was 18.

She is in our will to inherit an equal share of our house, about €100,000 at the moment. Did I read somewhere that because of her situation, she will be classified as our child for inheritance purposes?

Ms M.S.


Fostering has, until relatively recently, been treated as the forgotten child in Irish tax law, especially when it comes to inheritance. The good news is that this is no longer the case and your grandchild should be treated as your child for inheritance tax purposes.

Ireland has a long history of informal fostering within families for all sorts of reasons. The somewhat mixed experience across many years – and a growing number of children who have no relatives able to care for them – has seen the State put in place more formal arrangements. Most recently, these operate through Tusla, the State’s child and family agency.

According to latest data from Tusla, roughly one in five of the children in foster care are being cared for by relatives. But this only reflects the cases that are processed formally through the childcare regulations. There is another, frankly unknown number of children who are being cared for by relatives under informal arrangements.

You do not say which of these is the case here but I am assuming it is an informal arrangement, not least as you make no reference to the foster care allowance which is currently paid at a rate of €325 per week for a child under the age of 12 and €352 a week for an older child. These payments come through Tusla from local health board budgets, I understand, but they appear to apply only to children placed through the Child Care (Placement of Children in Foster Care) Regulations, 1995 – ie the more formal Tusla-operated structures.

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Those operating within the Tusla numbers would also have had to be assessed and approved by Tusla to operate under its relative carer programme, and the children would most likely have a social worker formally allocated to them.

Traditionally, the State baulked as treating foster children in the same way as other children in tax terms, considering them instead as “strangers in blood” and therefore entitled only to the lowest tax-free allowance on gifts and inheritances.

Despite the relatively low numbers – there are about 6,000 children within formal fostering arrangements – they worried, in the words of Labour’s then finance minister Ruairí Quinn, that broadening the Class A threshold “could have serious Revenue implications”.

That was as recently as 1996, after the current legislative framework for fostering was put in place.

There was also concern that the “precise legal definition of long-term foster care may also prove difficult to answer”.

Assuming this is an informal fostering arrangement – ie not organised through Tusla – your granddaughter must have lived with you for a total of five years up to the age of 18

In the end, they decided on fairly loose rules about such a definition, and Mr Quinn’s successor Charlie McCreevy introduced the concept of Foster Care Relief in the 2001 Finance Act.

That means foster children are now treated in the same way as any other child – subject to the highest inheritance-tax exemption, currently €335,000 under Category A – as long as certain rules are observed. And I cannot see any of these being an issue for you.

Assuming this is an informal fostering arrangement – ie not organised through Tusla – your granddaughter must have lived with you for a total of five years up to the age of 18. Clearly, in your case, this is not a problem, but other relatives in a similar position should know that various periods of residence can be added together to hit that five-year threshold over the 18-year period.

In addition, importantly, you need to have borne the financial burden of care for the child. So where the child was supported financially by a parent or someone else, even though they were living with a relative, they would struggle to qualify. Again, this is not an issue for you.

Obviously, it is the foster child who will be claiming the relief when you are gone. To do so, they will need to file a Capital Acquisitions Tax (CAT) Return form IT38. This is done online through the Revenue MyAccount channel.

On the form, your grandchild will have to enter the actual relationship between you and her – ie grandchild – under the “Relationship of Beneficiary to Disponer” dropdown menu on the “Disponer Details” page. But, importantly, she must also tick the box for foster child relief on the “Reliefs and Exemptions” page of the online form.

Because it is an informal family fostering, she will need to provide statements from two witnesses to corroborate the relationship between herself and you.

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