I am hoping to set up informal trust accounts for my 2 kids to put their investment portion of their allowance in as well as birthday money etc. This is external to their RESPs. I am making the assumption that I can set this up as a regular TD mutual fund account and then switch it over to TD e-series, I hope I’m right. I’ve come to understand that in order for informal trusts to be worth it...as in, not a big tax burden on me, they need to be capital gains intensive, since the donor is taxed on the dividends from the initial investment but the capital gains taxes are attributed to the beneficiary. This is probably a simpleton question but are index funds capital gains intensive? My kids are 5 & 8, and I was thinking of setting up the index funds as follows for the next 5-8 years:
Canadian – 30%
US – 30%
International – 30%
Bonds – 10%
Does this mix makes sense in an informal trust account? We’re not talking about a ton of cash, but I would like to shift their money into something that makes more money rather than just sitting in a savings account, while also creating an avenue to teach them about investing.