Investing

In-Trust Accounts for Minors

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  • Apr 24th, 2021 8:00 pm
[OP]
Deal Addict
Feb 26, 2016
1269 posts
348 upvotes
Vaughan

In-Trust Accounts for Minors

Just curious how many of you have a trading account set up as an In-Trust account (informal trust) for your minors.

Every year, my children receive cash gifts, whether it be birthday, chinese new years, etc. I was in the process of opening up a simple Tangerine children's savings account but interest rates are 0.02% and I figured that if I can get even a 1% annual return from holding positions, that'll be much better (especially over 18 years).

I plan on just buying simple ETFs or MFs with no dividends and just enjoy the capital appreciation. My understanding is that interest or dividends will be attributed to the donor (which I'm fine with) while capital gains will be taxed on the minors hands. Is this accurate? Anyone have experience in setting up an in-trust account on Questrade specifically. This is where I would look to open them as it is currently my trading platform.

https://www.taxtips.ca/personaltax/attributionrules.htm

"If income-producing property, or money which is used to purchase income-producing property, is transferred or loaned to a related minor, either directly or indirectly, or by means of a trust, the income from the property will normally be attributed back to the person giving the gift or loan. The capital gains from the property will be considered capital gains of the minor."
10 replies
Deal Fanatic
Aug 17, 2008
5752 posts
5194 upvotes
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otaknap wrote: Just curious how many of you have a trading account set up as an In-Trust account (informal trust) for your minors.

Every year, my children receive cash gifts, whether it be birthday, chinese new years, etc. I was in the process of opening up a simple Tangerine children's savings account but interest rates are 0.02% and I figured that if I can get even a 1% annual return from holding positions, that'll be much better (especially over 18 years).

I plan on just buying simple ETFs or MFs with no dividends and just enjoy the capital appreciation. My understanding is that interest or dividends will be attributed to the donor (which I'm fine with) while capital gains will be taxed on the minors hands. Is this accurate? Anyone have experience in setting up an in-trust account on Questrade specifically. This is where I would look to open them as it is currently my trading platform.

https://www.taxtips.ca/personaltax/attributionrules.htm

"If income-producing property, or money which is used to purchase income-producing property, is transferred or loaned to a related minor, either directly or indirectly, or by means of a trust, the income from the property will normally be attributed back to the person giving the gift or loan. The capital gains from the property will be considered capital gains of the minor."
Deal Addict
Oct 4, 2009
2751 posts
1629 upvotes
Montreal
otaknap wrote: maxed out
As in you’ve deposited the 50k maximum contribution per child?
Preloaded 14k + 2.5k for each year each child has been alive?
Or just 2.5k per year per child to get government subsidies?
[OP]
Deal Addict
Feb 26, 2016
1269 posts
348 upvotes
Vaughan
S5 wrote: As in you’ve deposited the 50k maximum contribution per child?
Preloaded 14k + 2.5k for each year each child has been alive?
Or just 2.5k per year per child to get government subsidies?
i've just maxed out the annual limit to get the grants.
Deal Addict
Oct 4, 2009
2751 posts
1629 upvotes
Montreal
Well then there is still 14k of tax deferred room per child and profits only taxable in their hands when attending post secondary school.
Deal Addict
User avatar
Dec 8, 2010
2486 posts
907 upvotes
I'd do it ONLY with a really clear paper trail... and for that, I would ONLY do it with Child Benefit money. Then it is entirely in their hands.

You have to do a tax return for them.
[OP]
Deal Addict
Feb 26, 2016
1269 posts
348 upvotes
Vaughan
S5 wrote: Well then there is still 14k of tax deferred room per child and profits only taxable in their hands when attending post secondary school.
what are the CESG grant implications of doing a lump sum deposit? I've looked into it online before but I couldn't quite find an answer. Do you just get the $500 each following year until the lifetime maximum CESG grant is reached? For simplicity, I was just maxing out the $2500 each year to ensure that I get the $500 grant each year. I'm worried that doing a lumpsum deposit might complicate the CESG grants which are limited to $500 a year (or $1000 if you have unused grant room)
Deal Addict
Oct 4, 2009
2751 posts
1629 upvotes
Montreal
If you add up to 14k more in a year where you’ve already contributed and you haven’t skipped any prior $2.5k a year contribution then there should be no CESG implication at all. A popular strategy for parents with lots of assets is to contribute 16.5k in year 1, leaving just enough room to earn maximum grants on yearly 2.5k contributions while getting an extra 14k compounding for the life of the plan.

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