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Can I use my kids savings to buy land or will it cause a tax issue?

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  • 12-12-2023 9:07am
    #1
    Marching Penguin
    Registered Users Posts: 3 ✭


    My kids have savings gifted by grandparents. I'd like to invest this money on the purchase of land, as this could make a great income for now. And they are currently making little from it. They are under 10. If I use it to buy land, then I'll be subject to inheritance tax, am I right? Is it an option?

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    #1
    Peregrinus
    Registered Users Posts: 26,410 ✭✭✭✭Peregrinus


    Hold on, you're getting ahead of yourself. Your kids have received cash gifts from their grandparents. If the amount involved is enough to buy land, it's a pretty significant amount. The question arises whether the amount was also enough to exceed the kids' lifetime CAT threshold for gifts from grandparents, which is €32,500 per kid. So the first thing you need to do is to establish whether your kids have a previously-unrecognised and unpaid liability to CAT on the gifts from their grandparents and, if so, you have to settle that liability.

    Ok, lets assume that's out of the way. If you use the kids' money to buy land it's not your land; its the kids' land. On that basis you can have no CAT liability; you haven't received any gift or inheritance. But you need to document the transaction in way that shows this land is not yours and you have received nothing. Talk to the solicitor who handles the purchase for your kids, but the likely way this will be done is you acquiring the land as a trustee for your kids.

    But before you do that, talk to your accountant about the tax treatment of trusts. Irish tax law generally doesn't look favourably on the establishment of trusts to shelter wealth or property for future generations, and you need to think about what income tax will be levied on the rent or other income received from the land while it is held in the trust.



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    #1
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,241 Mod ✭✭✭✭Jim2007


    https://www.boards.ie/discussion/2058326603/can-i-use-my-kids-savings-to-buy-land-or-will-it-cause-a-tax-issue

    First of all we’d need to know the nature of the inheritance and your role in administering it. Secondly if you are legally charged with administering it you are required to manage it in a prudent manner. The third thing is that land is a high risk, low return, illiquid asset and concentrating an entire portfolio in it would be considered financial mismanagement, thus leaving you open to having to compensate them for any loss that should arise. And families seem to be very good at getting into disputes over money. On top of this your understanding of the tax law is lacking.

    In the financial world where we deal in facts and statistics, land, property, precious metals and commodities are all high risk assets and placing more than about 6% or 7% of someone else’s money in them is considered very risky. As is failing to build to build a well balanced portfolio, by the way.

    You would not trust your kids health to anyone but properly qualified medical staff and so you should not trust their financial future to amateurs and the collective knowledge of the internet - get proper financial advice.



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    #2
    1373
    Registered Users Posts: 537 ✭✭✭1373


    Stamp duty on land can be 7% and if hit by more taxes at sale , then things would be interesting. Land is shocking expensive at the moment



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    #3
    cute geoge
    Registered Users Posts: 2,946 ✭✭✭cute geoge


    I would think your kids would have some thing to say when they find out what you have done with their inheritance, no wonder it was not yourself left anthing .Overall if it was your own money it would be an excellant investment but look likes you could cause a big family split with your brainwave



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    #4
    Deeec
    Registered Users Posts: 4,941 ✭✭✭Deeec


    Best advice is just leave your kids money in their bank account. No way should you use it to buy land



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    #5
    HazeDoll
    Registered Users Posts: 504 ✭✭✭HazeDoll


    There might be a good reason the kids' grandparents tried to give the gift directly to them instead of to you. If you think that's not the case you could discuss it with them (the grandparents) but I'd be surprised if they approve of letting you decide how to spend it. My guess is they were thinking of the kids' higher education, or first car.

    Get advice from as many legal and financial professionals as you can.

    Think of the position you might find yourself in a few years from now, explaining to your kids, their mother and grandparents that you've squandered their inheritance.



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    #6
    monseiur
    Registered Users Posts: 1,240 ✭✭✭monseiur


    Buying some land may not be a bad idea but keep it to a max. of 20% of each kids inheritance, put some in stocks & shares, some in State Savings etc. in othr words spread the risk......but above all be nince to your kids for one good reason - when the time come it's they who'll decide which old peoples home you'll end up in!!! (insert smiley emojee here)



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    #7
    amacca
    Registered Users Posts: 6,866 ✭✭✭amacca


    https://www.boards.ie/discussion/comment/121500695#Comment_121500695

    In fairness land might hold its value or increase in value by the time they need a car they might be able to buy lots of them with the proceeds of a sale of the land.

    Buying land isn't necessarily squandering, in fact in my lifetime Ife never heard anyone classify the purchase of land as squandering (pissing it all away on gambling or drink or shite furniture or other classes of depreciating asset = squandering in my view)....now a well diversified portfolio of stocks and shares / fund etc and the discipline to manage it snd not panic sell etc etc and perhaps a portion of or maybe no land at all etc might well be a much better investment however


    Depends on what value/revenue you can extract from an asset too...not all land was created equal.



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    #8
    Silverdream
    Registered Users Posts: 577 ✭✭✭Silverdream


    Farm Land in Ireland is the most expensive in the world, mainly due to the easy borrowing and favorable inheritance laws here. Any one change in those two could see land prices stagnate or even fall in value. As a farmer myself I can tell you there is a poor return from farming even if the farm is well run.

    If it was my kids money I'd be inclined to put it into something that they can easily retrieve the money from when they are older and need it for a house deposit or college education. I'd be putting it into some form of a managed fund and leave it to the experts.



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