TFSA - implications of giving gift to parents

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Mar 10th, 2022 12:01 pm

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Mar 10th, 2022 12:33 am

StickySituation [OP]: Jr. Member; Oct 7, 2015; 120 posts; 21 upvotes; Brampton, Ontario

Mar 10th, 2022 12:33 am

TFSA - implications of giving gift to parents

Hello, my parents will retire in a few years, though they aren't prepared for it. Here's their situation

Parents
1. Currently have low income
2. Next to nothing saved up in their TFSA & RRSP

My situation (their son)
1. Financially stable (maxed out TFSA & RRSP)
2. Have extra disposable income

I want my parents to have some sort of safety net in retirement. Can I gift them money every month to put in their TFSA?

My questions are
1. Will CRA have an issue? Will they see this as a tax avoidance scheme?
2. The money I gift comes from my 9-5 job (I've already paid tax on this money). But my parents will invest it in a TFSA income fund. Will their interest be attributed back to me as taxable income?
3. Is it better to give my parents a credit card under my name to use for their expenses, and they can contribute their paycheck into their TFSA?
4. Is it better to give my parents a "loan"?
5. Are there better ways I can help my parents save for retirement?

8 replies

Mar 10th, 2022 7:52 am

skeet50: Deal Fanatic; Jan 15, 2017; 5351 posts; 5495 upvotes; Ottawa

Mar 10th, 2022 7:52 am

Have you or your parents estimated their retirement income? As your parents currently have a low income and very little savings for retirement, my guess is that their retirement income will also be low. You may need to consider simply supplementing their monthly income to help them rather than helping them save money in a TFSA. Save for what? Retirement? They are already there. Just gift them a monthly amount either directly or you could decide to pay some of their bills for them.

+1

Mar 10th, 2022 8:11 am

teoconca: Deal Guru; Oct 16, 2008; 10294 posts; 4553 upvotes; Maple

Mar 10th, 2022 8:11 am

Monthly support money - cash when they retire.
Now? Does not do any good in TSFA or RRSP, interest rate is low and only few years to retirement.

...

+1

Mar 10th, 2022 9:39 am

hwyc2007: Sr. Member; May 24, 2018; 700 posts; 552 upvotes; Ontario

Mar 10th, 2022 9:39 am

Did somebody told you there would be implications ? There shouldn't be. You will be gifting after tax money. CRA had no business in that. Your parent should be free to use the amount. They could choose to contribute to a TFSA or not. You should have no strings attached, otherwise it is not truly gifting, isn't it.

+7

Mar 10th, 2022 9:59 am

SnowyDumpling: Member; May 15, 2019; 394 posts; 412 upvotes; GWN

Mar 10th, 2022 9:59 am

StickySituation wrote: ↑ Hello, my parents will retire in a few years, though they aren't prepared for it. Here's their situation

Parents
1. Currently have low income
2. Next to nothing saved up in their TFSA & RRSP

My situation (their son)
1. Financially stable (maxed out TFSA & RRSP)
2. Have extra disposable income

I want my parents to have some sort of safety net in retirement. Can I gift them money every month to put in their TFSA?

My questions are
1. Will CRA have an issue? Will they see this as a tax avoidance scheme?
2. The money I gift comes from my 9-5 job (I've already paid tax on this money). But my parents will invest it in a TFSA income fund. Will their interest be attributed back to me as taxable income?
3. Is it better to give my parents a credit card under my name to use for their expenses, and they can contribute their paycheck into their TFSA?
4. Is it better to give my parents a "loan"?
5. Are there better ways I can help my parents save for retirement?

I shall try to answer your queries.

1. CRA will not have an issue if you gift them "after-tax" assets i.e. Cash, Proceeds of Sold Capital assets (you declare the capital gain/loss). A gift between age of majority individuals is non-taxable provided that it is a bonafide gift with "no strings attached".
2. No, the interest will not be attributed back to you because you gifted them (Parents)money. There aren't minors or spouse involved.
3. A credit card under your name for their use will not attribute back to you unless you deduct the expense for tax purposes.
4. If you give them a bonafide loan, then you have to charge interest (consequentially they can deduct the innterest expense).
5. You've pretty much summed up the major $ amounts. Pay their expenses, let them save their money.
I commend your foresight and thoughtfullness for taking care of your parents. Well done.

+5

Mar 10th, 2022 10:18 am

catsoncoffee: Deal Addict; Apr 16, 2015; 1102 posts; 1406 upvotes

Mar 10th, 2022 10:18 am

It may also be better for you to provide them with ongoing support (pay their bills or give a monthly sum), rather than building up a large TFSA in their name. This is because many programs for low income people are means tested. Most programs like GIS, just count their income, but some may also look at assets. So, having an asset like a large TFSA may work against them for things like subsidies for long-term care homes.

+1

Mar 10th, 2022 11:33 am

will888: Deal Expert; Dec 12, 2009; 26075 posts; 16048 upvotes; Toronto

Mar 10th, 2022 11:33 am

I agree with the suggestion to fund the parent's retirement needs. Beyond that if there is the financial means to do so, the parent's TFSA accounts should be taken advantage of. There are no tax liabilities in do so.

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+1

Mar 10th, 2022 11:58 am

6060842: Deal Addict; Dec 23, 2015; 1461 posts; 3074 upvotes

Mar 10th, 2022 11:58 am

Consider buying dividend yielding investments inside your parents TFSA's . Dividends could either be reinvested or used to supplement income.

+1

Mar 10th, 2022 12:01 pm

callernamet: Deal Fanatic; Mar 10, 2018; 5152 posts; 1616 upvotes; does it matter?

Mar 10th, 2022 12:01 pm

will888 wrote: ↑ I agree with the suggestion to fund the parent's retirement needs. Beyond that if there is the financial means to do so, the parent's TFSA accounts should be taken advantage of. There are no tax liabilities in do so.

agree 100%.

Tried new coffee and doughnut. Found same old stale thing. expected bill of six bucks but it was 600 million. Big mistake so the guy said don't worry it is on the house. going back to McD.

+1

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