Opening a bank account in the name of a child and starting to deposit money so that they can accumulate some savings can have a tax consequence that is not always taken into account: if those funds become theirs, the operation can be considered a donation. It does not matter if the goal is to help them in the future with a home, pay for a car, or simply save money for when they are older. The key is to know who is the owner of the funds and if a free transfer has occurred.
The situation changes when parents do not give the money to the child, but simply incorporate them as co-holder of an account that still economically belongs to those who contributed the funds. In that case, being listed as an account holder at the bank does not necessarily mean having become the owner of a part of the balance.
The difference is explained to Demócrata by César García Novoa, professor of Financial and Tax Law at the University of Santiago de Compostela, based on the criteria established by the General Directorate of Taxes in its consultation V0640-25, of April 8, 2025. Mere co-ownership, he points out, does not in itself imply a donation.
Daniel Tallón, CMO and Marketing Director of TaxDown, reaches the same conclusion from a practical standpoint. "The Treasury does not prohibit anything, it simply qualifies the operation," he explains to Demócrata. To determine if there is a donation, three situations that may seem similar from the bank's perspective must be distinguished, but which are not fiscally: whether the child is the owner of the account, whether they are listed as a co-holder, or whether they are only authorized to operate with it.
Putting your child as a co-holder does not mean giving them half of the money
The consultation V0640-25 precisely addresses this issue.
Taxes analyzes what happens when parents incorporate their daughter as a holder of their bank accounts and concludes that this change does not necessarily imply a donation.
García Novoa explains to Demócrata the basis of that criterion. A bank account constitutes a deposit contract and the legal relationship is established between the depositor, owner of the deposited funds, and the entity that receives the funds. The appearance of several holders does not automatically modify who the true owner of the money is.
Co-ownership determines, in principle, who can dispose of the balance in front of the bank, but does not allow concluding that this money belongs to all holders equally.
It is a substantial difference.
If some parents have 40,000 euros from their savings and add their child as a co-holder, that simple change does not mean that they have donated 20,000 euros. The money can continue to belong entirely to those who contributed it.
The General Directorate of Taxes follows in this matter the criterion established by the Supreme Court: the power of disposition derived from a joint account does not determine by itself the ownership of the funds.
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Another thing is to open an account in the child's name and put the money there
The situation is different if the parents open an account in the child's name and deposit money with the intention that it becomes theirs.
"The money that the parents deposit enters the child's estate, so yes: it is a donation subject to the Inheritance and Donations Tax", explains Tallón to Demócrata.
García Novoa makes the same distinction. One thing is to incorporate someone as a co-holder of funds that still belong to the one who contributed them and another to part with the money to incorporate it freely into the child's estate.
It is in that patrimonial displacement where the donation appears.
The Law on Inheritance and Donations Tax establishes as a taxable event the acquisition of goods and rights through a donation or any other free legal transaction between living persons. Therefore, what is decisive is not only whose name appears on the account, but whether the child has actually acquired that money without giving anything in return.
The amount does not determine whether or not there is a donation
This point has another important consequence.
There is no general minimum in state legislation below which a free transfer of money automatically ceases to be a donation, explains García Novoa.
The nature of the operation does not depend on whether the parents give 500, 5,000, or 50,000 euros. If there is a free transfer that increases the child's estate, the taxable event of the Inheritance and Donations Tax may occur.
This also helps to understand what happens with family gifts.
García Novoa recalls that, with the law in hand, even certain money transfers made as wedding gifts can be considered a donation. Another issue is the practical action of tax administrations and that the checks focus on operations of greater economic relevance.
That a small cash delivery is not investigated does not mean that there is a general state exemption that leaves it out of the tax.
If the child uses the money for themselves, the situation may change
Co-ownership does not indefinitely protect any movement of funds.
A child can appear as a co-owner of an account whose money belongs entirely to their parents without there being a donation. But the situation changes if they subsequently appropriates part of that balance for their own benefit without cost.
Tallón precisely places the relevant moment there: "The donation appears at the moment when the co-owner who contributed nothing disposes of that money for their own benefit."
Let’s think of parents who add their child as a co-owner of an account with 50,000 euros. If the funds still belong to the parents, co-ownership does not automatically make the child an owner.
But if later they take 25,000 euros with the consent of their parents to pay the down payment on their own home and these give it to them for free, that operation will need to be analyzed as a property transfer.
The focus then shifts from who can move the money to who ends up keeping it.
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And there is a third figure: the authorized
The simplest alternative when parents want to allow a child to operate with their money without transferring ownership is to make them authorized.
"The authorized person does not own anything: they sign on behalf of the owner. There is no property transfer and therefore there is no donation or ISD", explains Tallón.
The authorization allows certain operations to be carried out, but does not attribute ownership of the balance to the authorized person.
There is also a boundary here. If they use the money for themselves because the parents decide to give it to them for free, the existence of a donation will need to be analyzed. The bank authorization does not change the nature of the transfer that may occur later.
It also does not make the authorized person the owner when the owner passes away. If the balance belonged to the deceased, it will be part of their hereditary estate and its transfer will be subject to the corresponding rules of the Inheritance Tax.
It is not usually the Tax Agency that inspects these donations
When talking about these operations, it is common to generically use the term "Hacienda," but there is an important precision.
The checks of the Inheritance and Donations Tax correspond generally to the tax administrations of the autonomous communities, not to the State Agency for Tax Administration.
The tax is state-level, but it is ceded to the autonomous communities of the common regime. Law 22/2009 delegates its application to them and, within the ceded competencies, the functions of management, collection, and inspection. (BOE)
Therefore, if a family residing in Madrid makes a donation subject to Madrid regulations, it will be the tax administration of the Community of Madrid that is competent for its management and eventual verification, not the AEAT.
There are specific cases in which the competence remains with the State, but they do not constitute the ordinary case of a donation between parents and children residing subject to an autonomous community.
In Madrid, donations from parents to children are discounted by 99%
That a money transfer is a donation does not necessarily mean that it is accompanied by a high tax invoice.
The Inheritance and Donations Tax presents very important differences between autonomous communities because these have regulatory competencies over the tax.
Madrid is one of the clearest examples. Donations between parents and children have a 99% discount on the fee, so that, when the established requirements are met, only 1% of the resulting fee must be paid.
The discount does not mean that the operation ceases to be a donation. It means that, once the tax is calculated, the autonomous regulations practically reduce the entire amount that would correspond to be paid.
Since July 2025, Madrid also applies a 100% discount for certain donations of up to 1,000 euros, regardless of the relationship, and has relaxed the formalities for some donations of up to 10,000 euros.
For donations between parents and children formalized in a public document, the Community maintains the 99% discount. When money is given, it requires that the source of the funds be duly justified.
Therefore, two statements can coexist: a money transfer can legally constitute a donation and, at the same time, have a very low tax cost due to the discounts of the corresponding autonomous community.
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The problem may arise when the money is used years later
Tallón points to Democrat where the main practical risk is usually found.
"Tax authorities almost never look at the opening of the account, they look at the outflow of money," he points out.
The money can remain in an account for years without any verification taking place. The issue may arise later when those funds appear linked to a larger transaction.
A house is the most obvious example. It can also happen with a car or an investment.
"The problem arises when that amount reappears in the purchase of a house, a car, or an investment and there is no declared donation behind it," explains the CMO of TaxDown.
At that moment, the regional tax administration may ask the taxpayer to prove the origin of the funds. If they come from their parents, it will be necessary to determine what the legal relationship was that allowed the child to dispose of them.
It could be money that already belonged to them, a family loan that can be proven as such, or a gift. In the latter case, the transaction may be considered a donation.
The origin of the money is decisive
The tax inquiry leads precisely to this issue.
Bank ownership may be an indication, but it does not resolve by itself who owns the balance. If there is a verification, it will be necessary to prove where the money came from and what really happened to it.
This explains why an account with several holders does not necessarily imply that they all own the same percentage.
It also helps to understand the opposite assumption: a person may not have contributed a single euro to an account and later end up receiving part of its funds. If that transfer is free, the prior existence of co-ownership does not prevent a donation from occurring.
The law itself establishes a presumption of lucrative transmission when the data from the Administration shows a decrease in a person's assets and, within the statute of limitations, a corresponding increase in certain relatives, including descendants.
Four years to verify
Tallón recalls that the general statute of limitations for tax matters is four years, the calculation of which must be determined based on the moment when the corresponding declaration period ended.
This means that a money transfer does not stop having consequences simply because the regional tax administration does not detect it when it is made.
Bank traceability can become relevant some time later. A transfer from the parents, the subsequent purchase of a home, or the payment for a vehicle can allow for the reconstruction of the origin of the funds if a verification is initiated.
That is why Tallón insists on the documentation of the operations: "It is not illegal, it is a poorly documented donation. Done correctly, in most cases the tax cost is almost zero."
Account holder, co-holder, or authorized: three distinct situations
The two sources consulted by Demócrata agree that the name that appears on the account is not enough to determine the tax consequences.
If the parents open an account in the child's name and deposit money for it to become theirs, there may be a donation.
If they include the child as co-holder on an account whose funds still belong to the parents, there is not necessarily any transfer. Being able to dispose of the balance in front of the bank does not equate to being its owner.
And if the child appears only as authorized, they can operate with the money within the granted powers, but they do not acquire ownership by that alone.
The difference appears when the money actually changes ownership.
That is the criterion that García Novoa extracts from consultation V0640-25 and that Tallón translates to the everyday functioning of these accounts. It is not the opening of the account that solely determines that there is a donation. It is what the parents do with the money and who ends up being its owner.