My son is very lucky as my parents want to give money to me for him when he’s older. They’d like it to be used for college fees, etc. I believe it will be about €200pm. I heard there is a tax efficient way to do this. Can you point me in the right direction and maybe have a chance of a good return on this money please?

You’re correct that your child is lucky, but that’s no reason not to make the best use of that luck. If your child’s grandparents have the good fortune to be able to give this money each year until they reach adulthood, it is a great windfall and certainly something that is worth investing.

The first thing to say is that if you want it to be tax efficient, you need to be careful as to how much and how this money is transferred. Anyone can give or receive €3,000 under the small gift exemption each year without any tax implications for either party. The €200pm you mentioned is well below this limit so you should be ok there.

The structure

The best way to achieve this is to set up a savings plan under a Bare Trust. Bare Trusts are used by parents or grandparents who want to put money in their children or grandchildren’s names while retaining control of how it is invested. This is suitable in a case like yours. You don’t want the sums to grow in your name and then be handed over in a lump sum to the child at a later stage when they will be discounted from their lifetime tax free limit, entirely undoing the benefit of the small gift exemption.

The basic rules of a Bare Trust are that money put into the trust cannot be reversed. Once lodged in the trust, the named beneficiary is absolutely and solely entitled to them. Also, the Bare Trust cannot be revoked. It is set up for a named beneficiary and, once that is done, you are locked into the process for any funds committed to it.

You act as trustee, essentially the manager of the assets which will be held in your name for the benefit of one or other of your children until they turn 18.

Investment choices

Having agreed the structure, the next thing is where to invest. It’s normally better to try make some more of this money than is possible by simply leaving it in a bank deposit account. And, in practical terms, this is likely to be in one or more of the range of unit-linked funds available in the market.

One of the things that puts people off these kinds of investments is the sheer range of choice, and this is where it will be worth your while to talk to a financial adviser. The key thing they will need to know is your attitude to risk. The instinctive response from most people is that they want to be sure they are not losing the money they are investing, but the only way to do that is to lock it into a cash fund where it will neither gain nor lose face value – although you will be worse off due to inflation and any fees charged.

In truth, you need to take some risk to benefit from an investment and, given your timeline is over 10 years, most advisers would suggest you embrace this to give your investment its best chance to grow. Over time, even modest differences in investment return can make substantial differences to the final pot. That doesn’t mean you need to be reckless. No one is suggesting that you put all your investment eggs in one basket but ultimately, investments like these are all about tapping into the power of compounding.

With the sort of timeframe that you are talking about with your child, most advisers will suggest that you should consider a reasonable element of risk to maximise returns because the timeframe is long enough to allow any short-term volatility to even itself out. But ultimately, it is up to you. The higher the risk, the higher the potential return; but, equally, the higher the chance of things going wrong. Please let us know if you’d like more detailed and/or personalised information.

WARNING: The value of your investment may go down as well as up.
WARNING: If you invest in these funds, you may lose some or all of the money you invest.
WARNING: Past performance is not a reliable guide to future performance.
WARNING: These funds may be affected by changes in currency exchange rates.


This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.

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