Author Topic: Canada: informal in-trust account for nephew  (Read 461 times)

Cookie78

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Canada: informal in-trust account for nephew
« on: January 14, 2018, 02:36:03 PM »
My nephew (12) is interested in FI (Yay!) and wants to start an investment account. He knows he can't open a TFSA yet, but we talked about using an informal in-trust account and I'm wondering if anyone has any experience with this.

I understand that I may be liable for some of the taxes (on interest and dividends) and I'm willing to contribute in this way up until he is 18. I also understand that it will impact his ability to get student loans in the future and the money may end up being used for that purpose. That's his call.

Is there anything else I should be aware of?

KMMK

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Re: Canada: informal in-trust account for nephew
« Reply #1 on: January 14, 2018, 02:44:34 PM »
My nephew (12) is interested in FI (Yay!) and wants to start an investment account. He knows he can't open a TFSA yet, but we talked about using an informal in-trust account and I'm wondering if anyone has any experience with this.

I understand that I may be liable for some of the taxes (on interest and dividends) and I'm willing to contribute in this way up until he is 18. I also understand that it will impact his ability to get student loans in the future and the money may end up being used for that purpose. That's his call.

Is there anything else I should be aware of?

Does he have an RESP started yet? That's one option. Then if he goes to post-secondary he'll get grant money. If not, you still get the money back out. And then you don't have to worry about current tax consequences.
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BNgarden

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Re: Canada: informal in-trust account for nephew
« Reply #2 on: January 14, 2018, 08:36:03 PM »
Started out with informal ITF (in trust for) for 3 nephews / nieces.  Switched over to contributing to RESPs set up by parents.  I did pay taxes on gains on funds in the ITF accounts for a couple of years.  Small amounts though.

Cookie78

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Re: Canada: informal in-trust account for nephew
« Reply #3 on: January 22, 2018, 12:06:02 PM »
My nephew (12) is interested in FI (Yay!) and wants to start an investment account. He knows he can't open a TFSA yet, but we talked about using an informal in-trust account and I'm wondering if anyone has any experience with this.

I understand that I may be liable for some of the taxes (on interest and dividends) and I'm willing to contribute in this way up until he is 18. I also understand that it will impact his ability to get student loans in the future and the money may end up being used for that purpose. That's his call.

Is there anything else I should be aware of?

Does he have an RESP started yet? That's one option. Then if he goes to post-secondary he'll get grant money. If not, you still get the money back out. And then you don't have to worry about current tax consequences.

There's no RESP or him yet. I'll have to chat with him about that option and what his future school plans are. I'm not sure he's thought that far ahead yet.

Started out with informal ITF (in trust for) for 3 nephews / nieces.  Switched over to contributing to RESPs set up by parents.  I did pay taxes on gains on funds in the ITF accounts for a couple of years.  Small amounts though.

Thanks. I don't mind paying small amounts just to help him get started. :)

GreenQueen

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Re: Canada: informal in-trust account for nephew
« Reply #4 on: January 22, 2018, 12:54:15 PM »
RESP is an incredible program, plus you get matching government grants up to a certain amount each year. Itís defintely worth looking into for anyone younger than college. I believe one of his parents has to be on the account to set it up, but starting one is very easy.

Cookie78

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Re: Canada: informal in-trust account for nephew
« Reply #5 on: January 23, 2018, 04:54:46 PM »
We had a chat today and he thinks the RESP option is better.

Thanks for your input.

Looks like I can set up an account as aunt, but his dad will have to go get him a SIN first.