Canadian Money Forum banner

1 - 8 of 8 Posts

·
Registered
Joined
·
89 Posts
Discussion Starter #1
Hi CFMers,

I am trying to set up a way for my kids to buy either stocks/etf's or as a last resort, TD e series funds (which isn't a bad idea considering the low amounts).

TD says the only way is to set up an 'informal in trust' non registered account.

This really is the kids money, it will be small amounts but I still dislike the idea of myself paying the taxes on their investments.
One idea is, have my spouse open the account and have her pay the kids taxes owing because she is currently in a low bracket.
Also, I thought of just earmarking a small amount of my TFSA room for the kids and then transfer it over at 18.

Has anyone gone through this and has an angle?

Appreciated.
 

·
Registered
Joined
·
785 Posts
Hi CFMers,

I am trying to set up a way for my kids to buy either stocks/etf's or as a last resort, TD e series funds (which isn't a bad idea considering the low amounts).

TD says the only way is to set up an 'informal in trust' non registered account.

This really is the kids money, it will be small amounts but I still dislike the idea of myself paying the taxes on their investments.
One idea is, have my spouse open the account and have her pay the kids taxes owing because she is currently in a low bracket.
Also, I thought of just earmarking a small amount of my TFSA room for the kids and then transfer it over at 18.

Has anyone gone through this and has an angle?

Appreciated.
I‘ve simply invested the money in my name and intend to transfer it over once they are 18. I have low-to-mid 5 figures invested. Not the ideal situation from a tax perspective but I couldn’t be bothered with the Informal trust.

RESPs are almost maxed in my case.
 

·
Registered
Joined
·
89 Posts
Discussion Starter #5
So I have a in trust account for my kid. You don't pay capital gains tax on appreciation just on dividends from my understanding.
When you take your name off this account at 18 will the capital gains just be forwarded to the newly minted adult, or do you think you will get tagged with a final tax bill?

Why is an RESP unsuitable?
An RESP can work, I might go that route, I was just hoping for more flexibility on the backside when they go to spend the funds.
 

·
Registered
Joined
·
16 Posts
When you take your name off this account at 18 will the capital gains just be forwarded to the newly minted adult, or do you think you will get tagged with a final tax bill?

The capital gains will be taxable to your child when they turn 18, not you. At which point they will likely be in a lower tax bracket. The rule once you put money into that informal trust is that you obviously can't pull it out.
 

·
Registered
Joined
·
59 Posts
When you take your name off this account at 18 will the capital gains just be forwarded to the newly minted adult, or do you think you will get tagged with a final tax bill?

The capital gains will be taxable to your child when they turn 18, not you. At which point they will likely be in a lower tax bracket. The rule once you put money into that informal trust is that you obviously can't pull it out.
This is correct, if the account is under the child's name it gets taxed within their bracket
 

·
Registered
Joined
·
2,971 Posts
When you take your name off this account at 18 will the capital gains just be forwarded to the newly minted adult, or do you think you will get tagged with a final tax bill?


An RESP can work, I might go that route, I was just hoping for more flexibility on the backside when they go to spend the funds.

For an informal In trust account, you can sell investment while the child is still a minor. The capital gains are taxed under the minor, dividends and interests based on attribution rules. If you are claiming a child as a dependant (divorced), the capital gains will impact the amount claimed.
If you don't have the RESP maxed out, then it doesn't make sense to even look at an information trust. You will not beat 20% gains (the grants). If the child doesn't goto post secondary school, then you can always put the amount of the gains into your own RRSP (assuming you have contribution room).
 
1 - 8 of 8 Posts
Top