Q: My husband and his three siblings would like to give a gift of up to €10,000 in total to a nephew whose dad, their brother, died shortly after the boy’s birth.

What would be the tax situation for their nephew if they do this?

A: These four siblings want to do a lovely thing. Their brother died some years ago, shortly after his son was born. The aunts and uncles subsequently lost touch with their nephew, but happily they have now reconnected with him.

Having come into a legacy sum, the siblings would like to share some of it with their nephew. But what is the situation with such gifts – will their nephew face a tax bill?

Capital acquisitions tax (CAT), sometimes referred to as gift or inheritance tax, is a beneficiary tax. It’s payable whenever a beneficiary receives a gift or inheritance that exceeds their tax-free threshold amount.

What determines the level of CAT is the relationship between the beneficiary and the person making the gift or inheritance, says solicitor Matthew Johnston, managing partner at Nooney & Dowdall Solicitors in Mullingar.

When a beneficiary receives a gift or inheritance, they can fall into one of three different tax-free threshold groups, depending on their relationship to the person giving the gift, says Johnston.

A child falls into the Group A threshold and can now inherit up to €420,000 tax free from a parent, a €20,000 increase announced as part of Budget 2027.

A nephew or niece falls into the Group B threshold of close blood relatives, which also includes siblings, a grandparent, aunt and uncle. They can now receive a maximum gift or inheritance of €44,000 tax free from each other due to a change in this week’s budget.

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Cousins, close friends, neighbours, carers or others all fall into a Group C threshold. The most they can receive tax free is now €22,000.

There is also the small gift exemption to consider. Anyone is entitled to give €3,000 per calendar year tax free to someone else. If a gift is more than €3,000, the first €3,000 is tax-exempt and the balance is deducted from the lifetime tax-free threshold they have in relation to the person giving the money.

With all of this in mind, it would be wise for the aunts and uncles here to give their nephew the €10,000 by way of four gifts of €2,500 each, says Johnston.

This way, the individual gifts fall below the allowable €3,000 small gift exemption.

“There will be absolutely no tax consequences for the nephew if they do that,” says Johnston.

It also means that, should any of his individual aunts or uncles want to give him a more substantial sum in future, their nephew’s €44,000 Group B tax-free threshold remains intact and can be availed of.

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“You are preserving the entirety of the nephew’s lifetime tax-free threshold from his aunts and uncles,” says Johnston.

Be sure to give the €10,000 as four individual gifts, he advises.

“If the aunts and uncles give it to one sibling and he transfers it to the nephew, it might look like that uncle gave the entire sum, rather than €2,500 coming from each individual,” says Johnston. “Get the nephew’s Iban and do four separate transfers.”

It would be wise to keep a record of the gift too, says Johnston.

This could be a simple email to their nephew from each aunt and uncle, explaining that the money is a gift, he says.

This record will be useful for the nephew too, showing that the money is indeed a gift and not potentially taxable income.

The name of the reader who submitted the question is not being published to protect the identities of those involved. Please send your legal queries to Joanne Hunt, Ask the Lawyer, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to joanne.hunt@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice.