A bare trust is a simple legal arrangement where a trustee holds assets on behalf of a beneficiary. The beneficiary is the ultimate owner of the assets and has full entitlement to them when they reach the age of majority.
Combining bare trusts with tax‑efficient investment strategies ensures that the assets you gift not only avoid immediate gift tax but also grow effectively over time.
A bare trust provides several advantages for managing and reducing gift tax liabilities:
In Ireland, you can gift up to €3,000 per person, per year tax-free. Here’s how a bare trust can optimise this:
Children can inherit up to €335,000 (Group A threshold) from their parents without paying CAT (as of 2024).
Larger gifts often trigger CAT at 33% on amounts exceeding the Group A threshold. A bare trust allows you to break this down into smaller, tax-free gifts over time.
Bare trusts can be an integral part of inheritance tax planning solutions, helping families preserve wealth without triggering unnecessary tax liabilities.
A parent wants to gift €120,000 to their child over 10 years while avoiding CAT.
Total gift: €120,000 over 10 years with no CAT liability.
Comparison Between €3,000 Annual Gifts and a €90,000 Lump Sum.
Scenario Assumptions:
Future value of an annuity.
Where:
FV = 3,000 × 6% over 30 years = €237,150.
Outcome:
The annual gifts grow to €237,150 after 30 years.
In some cases, combining bare trusts with retirement planning and generational wealth transfer can create a structured financial legacy that supports beneficiaries long-term.
Using the compound interest
Where:
FV = 90,000 × 6% over 30 years = €516,870.
Outcome:
The lump sum grows to €516,870, showing greater growth potential due to compounding.
| Method | Future Value (30 Years) | Tax Impact | Advantages |
|---|---|---|---|
| €3,000 Annually | €237,150 | None (Small Gift Exemption) | Steady growth, spread-out gifting. |
| Lump Sum €90,000 | €516,870 | None (Group A threshold) | Maximizes growth with an upfront transfer. |
If you’re planning for inheritance tax or capital acquisitions tax (CAT) liabilities, Section 73 policies can offer a tailored solution.
Get help from Smart Financial knowledgeable Savings & Investments advisers to discover coverage that meets your requirements.
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The Small Gift Exemption allows you to gift up to €3,000 per year, per recipient, tax-free.
Yes, bare trusts can help manage gradual wealth transfers, ensuring assets stay within tax-free thresholds and are protected for future use.
Absolutely. By leveraging exemptions and thresholds, bare trusts can minimise or eliminate gift and inheritance tax liabilities.
The beneficiary is liable for any taxes (e.g., Capital Gains Tax or income tax) on the assets, which can be advantageous if they are in a lower tax bracket.
Yes, bare trusts can hold a variety of assets, including property, shares, and investments, provided their value is tracked for tax purposes.
At Smart Financial, we specialise in creating personalised, tax-efficient wealth transfer solutions. Whether you want to use a bare trust to gift money or plan your inheritance strategy, our expert advisors are here to guide you.
Contact us today to secure your family’s financial future and minimise your tax liabilities.
