Author Topic: Maximizing opportunities for the kids  (Read 1987 times)

CanuckStache

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Maximizing opportunities for the kids
« on: October 05, 2017, 11:33:51 AM »
Hey all,

My wife and I just had our first baby about 5 weeks ago. He's great, growing like crazy already.

I'm trying to think of things I can set him up for / register for that will give him opportunities later on - either financially, for travel, for education, etc. For example:

Financial:

We're in Canada, so an example of this would be setting up an RESP - however that doesn't work for us, because my wife is American and the stupid US tax laws would tax our tax-sheltered Canadian RESP investment (long story). However for you other Canadians, obviously an RESP is a good place to start. So while we can't do that, I'm hoping we can find other things.

In BC when you register the child's birth you can also automatically apply for the child tax credit, SIN number, etc which is helpful.

Travel:

Before he was born, we pre-filled out his passport applications (both Canadian and US), gathered all the supporting documents etc. That way it was just a matter of getting the most ridiculously cute passport photos when he was born, waiting on the birth certificate, and submitting the paperwork. Getting his Canadian passport took all of 10 minutes at the passport office, but the US one was a little trickier.

We are located on Vancouver Island and there is no US consulate here. But there is one in Vancouver - not far away, but we have to take a ferry ($200 round trip), a whole day of time etc. And then we found out the US consulate does a thing called "Pop-up consulates" where they travel around the province from time to time to take birth registrations of US citizens and such.

That was great - saved us at least $200 and was super fast and easy. Much better than standing in line at an embassy and spending a full day traveling. And getting most of the paperwork done ahead of time things much easier than trying to do all that while being completely sleep deprived. This also got him what's called a "Certified Registration of Birth Abroad" and a US social security number.

So now junior is officially a US and Canadian citizen! Pretty awesome - he'll have the opportunity to live/work/study anywhere in those two countries. We wanted to register him for this right away since you never know how immigration laws will change. We also registered him for NEXUS (speeds up customs between Canada-US) because it's free for under 18 year old children, and also gets him TSA pre-check and a few other things. So when we do travel across the border from time to time, it'll make it a little less stressful.

In that same vein, I'm actually also a dual German citizen - and we're in the process of getting him registered there. That would mean EU residency rights as well. 3 passports - pretty cool!

Education/Activities:

Well we've already schedule swim lessons for when he hits the 4 month mark (thankfully it's refundable if he doesn't seem ready for it).

Also we got him on the waiting list for a few daycares in town. Even though most don't take babies until they're 12 months or more, the wait lists can be crazy. Getting him registered for a few right away and pay $20 each to hold the spots will make sure we have some options when the time comes.

Anyways that's just a start. Does anyone else have some suggestions? What can we do now, that will help future-baby (and future-parents) maximize opportunities?

Bourbon

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Re: Maximizing opportunities for the kids
« Reply #1 on: October 05, 2017, 11:37:27 AM »
Teach him to sleep.

CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #2 on: October 05, 2017, 11:41:18 AM »
Teach him to sleep.

He's doing pretty great at that so far. Sleeping in 4 hour stretches at night, much better than that first couple weeks where it's 1.5 hour stretches.

Laura33

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Re: Maximizing opportunities for the kids
« Reply #3 on: October 05, 2017, 12:31:50 PM »
The only specific thing I can think of was getting a bunch of official copies of the birth certificate, because we knew we were moving to a different state shortly after DD was born and didn't want to have to fish around for that later.  Also doing the paperwork for SS cards.

Financially, we started saving for college before we had our first.  We figure if they don't go, the money can give them a good start on a home or something.  We also put any birthday checks they receive into that account as well.

More important, though, is making sure your downside risk is protected.  Do you have a guardian identified and all of the paperwork done?  Do you have whatever life insurance you need to protect the survivor (assuming you need any over and above any government survivor benefits that may be available)?  The most important thing you can do for your kid is to be there as he grows up.  If the worst happens and you don't get that privilege, you want to make sure he is protected and cared for and loved as best he can be.
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CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #4 on: October 05, 2017, 12:42:58 PM »
That all makes sense. Yeah we ordered a few copies of the birth certificate because it always sucks when you need it for something and can't find it.

We're not really saving anything specifically for his education for a couple of reasons:

1) Nobody did for me, and I never went to university - started my own business instead and am doing just fine. Wife went to school and her family spent tens of thousands for her to get a degree in arts that isn't used at all (not for lack of trying..it's just really hard to make money at it). Instead she also runs her own completely non-related business that had nothing to do with her education.

2) We've got junior that German / EU passport meaning he can go to university there, free of charge.

But yeah - for those saving for kids higher education, it definitely makes sense to take advantage of any grants (or like we have here, RESP) programs.

When the wife was still pregnant and people wanted to buy us baby things, we specifically said no toys - only books, or something we can actually use. Some people gave us money and we debated putting it into a savings account of some sort for the kiddo but ultimately decided that hey, if we use that money for diapers instead, it's still being used on him. I'm sure if someone gave us a particularly large amount we'd do something more interesting with it, but $50 here or there, we'll just put towards his 'maintenance' expenses :)


Oh! And yes - having a proper will is HUGE. My dad passed away a few years ago, and he had a well laid out will specifying all his wishes. Made a stressful situation much easier - no arguing over 'what he would have wanted' - it was all laid out clearly.

My wife and I had ours done up recently and also the part about guardians. We also did up something in addition to the will (I can't remember what its called) that takes effect if say one of us is in a coma. A power of attorney, but more than that. It lays out a bunch of specific scenarios and asks some hard questions about what you want done. For example, you get put on life support after a bad fall. Do you want your family to pull the plug? What, if any, religious ceremony do you want performed in such a situation? That kind of stuff.
« Last Edit: October 05, 2017, 01:31:19 PM by CanuckStache »

Laura33

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Re: Maximizing opportunities for the kids
« Reply #5 on: October 05, 2017, 01:50:41 PM »
We're not really saving anything specifically for his education for a couple of reasons:

1) Nobody did for us, and I never went to university - started my own business instead and am doing just fine. Wife went to school and her family spent tens of thousands for her to get a degree in arts that isn't used at all (not for lack of trying..it's just really hard to make money at it). Instead she also runs her own completely non-related business that had nothing to do with her education.

2) We've got junior that German / EU passport meaning he can go to university there, free of charge.

So let me (softly) encourage you to re-think this, just a little.  First, you're a smart guy, you know that your and your wife's situation is not necessarily representative of everyone's.  There are a lot of jobs that do require degrees.  And even worse, a big -- and growing -- issue nowadays is that many jobs are using a degree as screening criteria, even if the job doesn't need it.  For me, I want to be able to set up my kids to pursue whatever (reasonable) path they want.  Maybe your kid would struggle as an entrepreneur but would make an awesome engineer.  But if you've planned on the first path, it's harder to change to the second; OTOH, if you plan for the second and he follows the first, then the only downside is you saved more money you now don't have to spend.

Second, IME, even the trades and similar routes are now pushing toward some type of post-HS education (my HS used to offer a vo-tech course that allowed kids to attend school half-time and learn a trade the other half of the day; now it's the community college that offers things like welding and plumbing courses; my brother just went to culinary school and it cost him like $50K, I shit you not -- all to work in a bakery for $9-10/hr.). 

Third, if you want to be an entrepreneur or run your own business, it's good to be able to afford some accounting and business classes -- I've watched way too many businesses go under for lack of a clue (e.g., the store that opened and closed within 3 mos -- wtf?  How can you open a business and not have sufficient cash reserves to cover your bills for 3 mos.??). 

Fourth:  honestly, if you don't save anything, and your kid wants to go to college in the states, he is fucked -- college costs are soaring, and people truly have no clue how much the expected parental contribution turns out to be.  It is getting harder and harder to work your way through school -- or, at least, to do so without taking a lot of extra time to graduate, or taking on a lot of loans (either one of which will set him back on his journey to FI). 

And fifth:  no one knows what the future holds, and having a little extra cash set aside never hurts.  Maybe Germany will change its university policy by then, or maybe your kid won't qualify.  Or maybe your kid doesn't go to college but you want to help him with a downpayment on a home.  Etc. 

In sum, you framed this post up as maximizing opportunities for the kids.  One way that many parents do that is to make sure their kids can afford go to college, IF they want to and can get in.  Because for those kids for whom college is the right choice, being able to graduate in four years, without a lot of debt, is a huge leg up towards their own financial independence.  It also doesn't have to mean committing funds specifically for that; we have a VTSAX account that is mentally earmarked to cover college stuff, but if we don't need it, hey, it's in our names, more money for us! 

Obviously, you don't have to save anything if you don't want.  You can decide that your kid will learn more by paying his own way and being independent earlier, or that college is overrated, or that your kid can take over your business, or whatever.  Just suggesting some things to consider given the stated goal of maximizing opportunities.
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boarder42

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Re: Maximizing opportunities for the kids
« Reply #6 on: October 05, 2017, 02:09:31 PM »
We're not really saving anything specifically for his education for a couple of reasons:

1) Nobody did for us, and I never went to university - started my own business instead and am doing just fine. Wife went to school and her family spent tens of thousands for her to get a degree in arts that isn't used at all (not for lack of trying..it's just really hard to make money at it). Instead she also runs her own completely non-related business that had nothing to do with her education.

2) We've got junior that German / EU passport meaning he can go to university there, free of charge.

So let me (softly) encourage you to re-think this, just a little.  First, you're a smart guy, you know that your and your wife's situation is not necessarily representative of everyone's.  There are a lot of jobs that do require degrees.  And even worse, a big -- and growing -- issue nowadays is that many jobs are using a degree as screening criteria, even if the job doesn't need it.  For me, I want to be able to set up my kids to pursue whatever (reasonable) path they want.  Maybe your kid would struggle as an entrepreneur but would make an awesome engineer.  But if you've planned on the first path, it's harder to change to the second; OTOH, if you plan for the second and he follows the first, then the only downside is you saved more money you now don't have to spend.

Second, IME, even the trades and similar routes are now pushing toward some type of post-HS education (my HS used to offer a vo-tech course that allowed kids to attend school half-time and learn a trade the other half of the day; now it's the community college that offers things like welding and plumbing courses; my brother just went to culinary school and it cost him like $50K, I shit you not -- all to work in a bakery for $9-10/hr.). 

Third, if you want to be an entrepreneur or run your own business, it's good to be able to afford some accounting and business classes -- I've watched way too many businesses go under for lack of a clue (e.g., the store that opened and closed within 3 mos -- wtf?  How can you open a business and not have sufficient cash reserves to cover your bills for 3 mos.??). 

Fourth:  honestly, if you don't save anything, and your kid wants to go to college in the states, he is fucked -- college costs are soaring, and people truly have no clue how much the expected parental contribution turns out to be.  It is getting harder and harder to work your way through school -- or, at least, to do so without taking a lot of extra time to graduate, or taking on a lot of loans (either one of which will set him back on his journey to FI). 

And fifth:  no one knows what the future holds, and having a little extra cash set aside never hurts.  Maybe Germany will change its university policy by then, or maybe your kid won't qualify.  Or maybe your kid doesn't go to college but you want to help him with a downpayment on a home.  Etc. 

In sum, you framed this post up as maximizing opportunities for the kids.  One way that many parents do that is to make sure their kids can afford go to college, IF they want to and can get in.  Because for those kids for whom college is the right choice, being able to graduate in four years, without a lot of debt, is a huge leg up towards their own financial independence.  It also doesn't have to mean committing funds specifically for that; we have a VTSAX account that is mentally earmarked to cover college stuff, but if we don't need it, hey, it's in our names, more money for us! 

Obviously, you don't have to save anything if you don't want.  You can decide that your kid will learn more by paying his own way and being independent earlier, or that college is overrated, or that your kid can take over your business, or whatever.  Just suggesting some things to consider given the stated goal of maximizing opportunities.

i strongly disagree with most of your sentiment here.  and agree with the OP's decision to not save.  I personally think the entire landscape of learning and higher education will change dramatically in the next 18 years.  technology and the rising prices of higher education will come together to greatly decrease the overall costs of learning.  Most kids shouldnt be attending college now anyways and do it b/c its just the next step.  I could see some of that changing with more self driven on demand courses,  kids may decide to travel after HS or work for a bit before they jump into college(which i believe will be easily accessible via cheap internet course taught by the top minds in their respective industries)

Also even at today's prices a child can graduate debt free by working and using scholarships in school.  I personally do not see the reason to save extra money for a kids college education.  and think the OPs decision is very sound. 
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CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #7 on: October 05, 2017, 02:24:18 PM »
We're not really saving anything specifically for his education for a couple of reasons:

1) Nobody did for us, and I never went to university - started my own business instead and am doing just fine. Wife went to school and her family spent tens of thousands for her to get a degree in arts that isn't used at all (not for lack of trying..it's just really hard to make money at it). Instead she also runs her own completely non-related business that had nothing to do with her education.

2) We've got junior that German / EU passport meaning he can go to university there, free of charge.

So let me (softly) encourage you to re-think this, just a little.  First, you're a smart guy, you know that your and your wife's situation is not necessarily representative of everyone's.  There are a lot of jobs that do require degrees.  And even worse, a big -- and growing -- issue nowadays is that many jobs are using a degree as screening criteria, even if the job doesn't need it.  For me, I want to be able to set up my kids to pursue whatever (reasonable) path they want.  Maybe your kid would struggle as an entrepreneur but would make an awesome engineer.  But if you've planned on the first path, it's harder to change to the second; OTOH, if you plan for the second and he follows the first, then the only downside is you saved more money you now don't have to spend.

Second, IME, even the trades and similar routes are now pushing toward some type of post-HS education (my HS used to offer a vo-tech course that allowed kids to attend school half-time and learn a trade the other half of the day; now it's the community college that offers things like welding and plumbing courses; my brother just went to culinary school and it cost him like $50K, I shit you not -- all to work in a bakery for $9-10/hr.). 

Third, if you want to be an entrepreneur or run your own business, it's good to be able to afford some accounting and business classes -- I've watched way too many businesses go under for lack of a clue (e.g., the store that opened and closed within 3 mos -- wtf?  How can you open a business and not have sufficient cash reserves to cover your bills for 3 mos.??). 

Fourth:  honestly, if you don't save anything, and your kid wants to go to college in the states, he is fucked -- college costs are soaring, and people truly have no clue how much the expected parental contribution turns out to be.  It is getting harder and harder to work your way through school -- or, at least, to do so without taking a lot of extra time to graduate, or taking on a lot of loans (either one of which will set him back on his journey to FI). 

And fifth:  no one knows what the future holds, and having a little extra cash set aside never hurts.  Maybe Germany will change its university policy by then, or maybe your kid won't qualify.  Or maybe your kid doesn't go to college but you want to help him with a downpayment on a home.  Etc. 

In sum, you framed this post up as maximizing opportunities for the kids.  One way that many parents do that is to make sure their kids can afford go to college, IF they want to and can get in.  Because for those kids for whom college is the right choice, being able to graduate in four years, without a lot of debt, is a huge leg up towards their own financial independence.  It also doesn't have to mean committing funds specifically for that; we have a VTSAX account that is mentally earmarked to cover college stuff, but if we don't need it, hey, it's in our names, more money for us! 

Obviously, you don't have to save anything if you don't want.  You can decide that your kid will learn more by paying his own way and being independent earlier, or that college is overrated, or that your kid can take over your business, or whatever.  Just suggesting some things to consider given the stated goal of maximizing opportunities.


I don't want this to turn into a discussion on the merits of paying for kids education (simply because there are many other threads discussing that) - but those are all great points, and I'll just quickly respond.

Personally, you pegged me at the end of your post. I think I'll let the kid decide what he wants to do. If they want to go to school in the US, great! Figure out how to do it. Many people do all the time. If that means taking on debt, then weigh if it's worth your time / effort. If it means 'he's fucked', then hopefully he will be smart enough to do the math and decide against it.

From my point of view I've been far better served in life by having to make my own choices in regards to post secondary education, rather than buy into the narrative that "you have to get a degree to get a job". While my friends after high school went to university, I worked crappy jobs for a couple years, saved my money, traveled the world and started a business that's allowed me to be semi-retired since the age of 25. Obviously, that's not typical and isn't to be expected for others. But if I had my parents paying for university and constantly telling me that I had to go to university (as was common with most of my peers), I probably would have gone and I wouldn't have lived my life and had the opportunities that I did/do. Maybe if I went to university I would be an even more fortunate entrepreneur. Who knows.

That's why I'm saying, yeah, put money aside and get grants / tax benefits where possible if you are planning on paying for your kids education. A downside of my child's US citizenship is that because of the IRS worldwide tax laws, it negates any Canadian tax-sheltered RESP benefit. Otherwise, even though I'm not planning on paying for his education, I would have opened an RESP since the RESP gives a tax-sheltered place for money to grow as well as you get free cash from the government - I'd put a few bucks in it, as well as put any future 'birthday cash' in it. Besides the point - junior will have plenty of summers to work and save his own money.

But since that isn't available to us, it makes more sense to me to just save / invest the money the way we already are, and if my mind or circumstance changes, I can always gift him the cash in the future or pay for his education myself. I don't need to set aside a separate account just for that purpose (since there's no benefit apart from organization at this point). (much like the VTSAX holding you referenced).

So to summarize - I agree with your summary. There are many approaches.

Quote
In sum, you framed this post up as maximizing opportunities for the kids.  One way that many parents do that is to make sure their kids can afford go to college, IF they want to and can get in.  Because for those kids for whom college is the right choice, being able to graduate in four years, without a lot of debt, is a huge leg up towards their own financial independence.  It also doesn't have to mean committing funds specifically for that; we have a VTSAX account that is mentally earmarked to cover college stuff, but if we don't need it, hey, it's in our names, more money for us! 

So in addtion to saving / not saving for higher education - what else can we do to help maximize opportunities?

One thing my wife was joking about was sending junior to a Mandarin day care - probably a good language to be exposed in the coming years (though I don't think it makes sense unless he is going to take lessons for many more years).
« Last Edit: October 05, 2017, 02:29:02 PM by CanuckStache »

Laura33

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Re: Maximizing opportunities for the kids
« Reply #8 on: October 05, 2017, 07:18:58 PM »
You guys are right, didn't mean to turn this into a college thread.  All I can say is, boarder, I have been hearing about unsustainable college costs since I graduated 25 years ago.  College is absolutely not the only path, nor is parental funding.  But in a post about maximizing options for your kids, I think it bears mentioning.  That is all.

CanuckStache:  one opportunity you can give your kid that many don't have is experience in your business.  I think seeing up close and personal what running a business actually entails is fantastic experience for any kid.  Encourage his own entrepreneurial ideas.

Language-based daycares don't so much do it for me; IME, languages don't really stick unless they are spoken at home.  Honestly, I got more out of ES Latin than anything else, because it helped me decipher English and piece together meanings to unfamiliar words.  I think the basics go a long way -- read all the time, talk about science and do experiments just for fun, play math games in the car, explore nature, etc.  Show him the world -- and then just go wherever his interests lead.
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Goldielocks

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Re: Maximizing opportunities for the kids
« Reply #9 on: October 05, 2017, 09:43:15 PM »
RESP -- double check the rules, but the program is quite a nice bonus.
If the non US parent sets up an RESP, alone, why would it be taxed if you don't file US taxes jointly?
OR, could a grandparent or someone else set it up and contribute to it?
Know that many US schools qualify for RESP payments, the program is quite versatile in how you withdraw money too, and many types of school qualify, as long as FT (80% load) is taken.

Next - some of the better german universities do charge costs, and living costs and flights cost money, as do german language classes in high school.  I have a friend's son, thinking about this, and he is 16 with a  german passport.   He is just realizing what it could cost.

Saving for kid -- Unless you have a high income, prioritize your retirement for the next few years, and only save a token amount  (maybe $500 per year, max) for the kid's education until they are about 10 years old (and childcare costs have fallen off).   It does not cost that much to go to undergrad in Canada, especially if you live at home and are outside of Ontario.   You can likely cashflow tuition over the 12 years that you have to save for it , plus your kid will earn some money during the summer breaks.

shelivesthedream

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Re: Maximizing opportunities for the kids
« Reply #10 on: October 06, 2017, 02:00:05 AM »
Teach your child German! With good language fluency and a German passport, that's a whole new world opening up to them.

You don't have to save for college/university, but I would set up a savings account in their name and put a little bit of money into it. Having $5000 at age eighteen is a huge boost. It can go towards a car, rental deposit, tuition, a holiday, a rainy day... And also provides a teachable moment. You've got a 'windfall' - how do you plan for the future and decide whether to blow all or some of it and what on? Don't let them have it until 18 but let them know it's there so they can start thinking about it. It might bring up some useful conversations

elaine amj

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Re: Maximizing opportunities for the kids
« Reply #11 on: October 06, 2017, 08:49:50 AM »
RESP -- double check the rules, but the program is quite a nice bonus.
If the non US parent sets up an RESP, alone, why would it be taxed if you don't file US taxes jointly?
OR, could a grandparent or someone else set it up and contribute to it?
Know that many US schools qualify for RESP payments, the program is quite versatile in how you withdraw money too, and many types of school qualify, as long as FT (80% load) is taken.

My husband is a dual citizen. We file our taxes married, filing separately. The RESP account is under my name alone. It doesn't affect DH's US taxes and is not considered as income for him. I sock away the max amount of contributions allowed there for the 20% govt match. I do plan to pay for tuition for my kids and whatever is not spent from that account, I plan to claw back from my kids (i.e. get my kids to withdraw it and hand me the cash haha). I started discussing this with my kids from the time they were about 12/13 so they won't be blindsided when the time comes and understand what I will/won't cover.
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CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #12 on: October 06, 2017, 09:19:51 AM »
RESP -- double check the rules, but the program is quite a nice bonus.
If the non US parent sets up an RESP, alone, why would it be taxed if you don't file US taxes jointly?
OR, could a grandparent or someone else set it up and contribute to it?
Know that many US schools qualify for RESP payments, the program is quite versatile in how you withdraw money too, and many types of school qualify, as long as FT (80% load) is taken.

My husband is a dual citizen. We file our taxes married, filing separately. The RESP account is under my name alone. It doesn't affect DH's US taxes and is not considered as income for him. I sock away the max amount of contributions allowed there for the 20% govt match. I do plan to pay for tuition for my kids and whatever is not spent from that account, I plan to claw back from my kids (i.e. get my kids to withdraw it and hand me the cash haha). I started discussing this with my kids from the time they were about 12/13 so they won't be blindsided when the time comes and understand what I will/won't cover.

It's definitely complicated:
http://www.advisor.ca/tax/tax-news/be-careful-with-resps-for-u-s-persons-211279

My wife files to the US and not me. But certain things we have to be careful of - for example we can't have a joint bank account, otherwise I have to report to the US. Also we don't have her name on the title of our home, because if we sell it, she's liable for capital gains taxes in the US. It's freaking crazy - a house in Canada, paid with Canadian dollars, owned by Canadian residents, and we'd have to pay capital gains to the US just because my wife has a US passport. I think only the US and Eritrea tax their citizens on globally earned income. But I digress.. and I don't want to stray too far off topic.

I have an excellent account who specializes in cross border taxation issues and in his words, "Just stay away from it. It'll cost more to pay me to structure it to minimize tax damage and file annually than any benefit that will come out of it - if you want to save for his education, open a separate investment account".

elaine amj

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Re: Maximizing opportunities for the kids
« Reply #13 on: October 06, 2017, 10:24:01 AM »
It's definitely complicated:
http://www.advisor.ca/tax/tax-news/be-careful-with-resps-for-u-s-persons-211279

My wife files to the US and not me. But certain things we have to be careful of - for example we can't have a joint bank account, otherwise I have to report to the US. Also we don't have her name on the title of our home, because if we sell it, she's liable for capital gains taxes in the US. It's freaking crazy - a house in Canada, paid with Canadian dollars, owned by Canadian residents, and we'd have to pay capital gains to the US just because my wife has a US passport. I think only the US and Eritrea tax their citizens on globally earned income. But I digress.. and I don't want to stray too far off topic.

I have an excellent account who specializes in cross border taxation issues and in his words, "Just stay away from it. It'll cost more to pay me to structure it to minimize tax damage and file annually than any benefit that will come out of it - if you want to save for his education, open a separate investment account".

I agree - US taxation is crazy. I'd go with your accountant's advice :) Our accountant just told us to put the RESPs in my name so my DH won't have to file anything extra.

And yes, we report our joint bank account as well as all his other Cdn investments, etc. Pain in the neck. Thankfully, we haven't had to pay any US taxes on all this yet (he's not super high income though - makes under $100k/yr so I think that makes a difference). I believe for houses, you only pay US taxes if your capital gains on your property is above something like $250k (which is extremely unlikely where we live). And this is because capital gains on your home is not taxed in Canada (so no foreign tax credits earned) but taxed in the US if it is over $250k (of course this can change depending on whatever is in the current tax code).
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Novik

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Re: Maximizing opportunities for the kids
« Reply #14 on: October 06, 2017, 11:47:52 AM »
It's definitely complicated:
http://www.advisor.ca/tax/tax-news/be-careful-with-resps-for-u-s-persons-211279

My wife files to the US and not me. But certain things we have to be careful of - for example we can't have a joint bank account, otherwise I have to report to the US. Also we don't have her name on the title of our home, because if we sell it, she's liable for capital gains taxes in the US. It's freaking crazy - a house in Canada, paid with Canadian dollars, owned by Canadian residents, and we'd have to pay capital gains to the US just because my wife has a US passport. I think only the US and Eritrea tax their citizens on globally earned income. But I digress.. and I don't want to stray too far off topic.

I have an excellent account who specializes in cross border taxation issues and in his words, "Just stay away from it. It'll cost more to pay me to structure it to minimize tax damage and file annually than any benefit that will come out of it - if you want to save for his education, open a separate investment account".

I agree - US taxation is crazy. I'd go with your accountant's advice :) Our accountant just told us to put the RESPs in my name so my DH won't have to file anything extra.

I believe the challenge in CanuckStache's case is that the child is also a US citizen. My understanding is that for an RESP to be simple, it needs to be held by a non-US citizen (so fine for one parent) but since the proceeds are eventually taxed in the hands of the child, the child needs to also be a US citizen.

(There may be workarounds I'm not aware of, not being an accountant.)
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elaine amj

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Re: Maximizing opportunities for the kids
« Reply #15 on: October 06, 2017, 12:02:01 PM »
It's definitely complicated:
http://www.advisor.ca/tax/tax-news/be-careful-with-resps-for-u-s-persons-211279

My wife files to the US and not me. But certain things we have to be careful of - for example we can't have a joint bank account, otherwise I have to report to the US. Also we don't have her name on the title of our home, because if we sell it, she's liable for capital gains taxes in the US. It's freaking crazy - a house in Canada, paid with Canadian dollars, owned by Canadian residents, and we'd have to pay capital gains to the US just because my wife has a US passport. I think only the US and Eritrea tax their citizens on globally earned income. But I digress.. and I don't want to stray too far off topic.

I have an excellent account who specializes in cross border taxation issues and in his words, "Just stay away from it. It'll cost more to pay me to structure it to minimize tax damage and file annually than any benefit that will come out of it - if you want to save for his education, open a separate investment account".

I agree - US taxation is crazy. I'd go with your accountant's advice :) Our accountant just told us to put the RESPs in my name so my DH won't have to file anything extra.

I believe the challenge in CanuckStache's case is that the child is also a US citizen. My understanding is that for an RESP to be simple, it needs to be held by a non-US citizen (so fine for one parent) but since the proceeds are eventually taxed in the hands of the child, the child needs to also be a US citizen.

(There may be workarounds I'm not aware of, not being an accountant.)

Oh boy. I need to talk to my accountant. And study more. My kids are US citizens. I figured they would have to file US taxes on the RESPs, but figured that would be pretty much 0 with such low overall income at that time.
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Novik

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Re: Maximizing opportunities for the kids
« Reply #16 on: October 06, 2017, 12:14:02 PM »
It's definitely complicated:
http://www.advisor.ca/tax/tax-news/be-careful-with-resps-for-u-s-persons-211279

My wife files to the US and not me. But certain things we have to be careful of - for example we can't have a joint bank account, otherwise I have to report to the US. Also we don't have her name on the title of our home, because if we sell it, she's liable for capital gains taxes in the US. It's freaking crazy - a house in Canada, paid with Canadian dollars, owned by Canadian residents, and we'd have to pay capital gains to the US just because my wife has a US passport. I think only the US and Eritrea tax their citizens on globally earned income. But I digress.. and I don't want to stray too far off topic.

I have an excellent account who specializes in cross border taxation issues and in his words, "Just stay away from it. It'll cost more to pay me to structure it to minimize tax damage and file annually than any benefit that will come out of it - if you want to save for his education, open a separate investment account".

I agree - US taxation is crazy. I'd go with your accountant's advice :) Our accountant just told us to put the RESPs in my name so my DH won't have to file anything extra.

I believe the challenge in CanuckStache's case is that the child is also a US citizen. My understanding is that for an RESP to be simple, it needs to be held by a non-US citizen (so fine for one parent) but since the proceeds are eventually taxed in the hands of the child, the child needs to also be a US citizen.

(There may be workarounds I'm not aware of, not being an accountant.)

Oh boy. I need to talk to my accountant. And study more. My kids are US citizens. I figured they would have to file US taxes on the RESPs, but figured that would be pretty much 0 with such low overall income at that time.

I could absolutely be wrong about this (in fact, I hope so for both your and CanuckStache's kids cases). My kids won't get US citizenship since I've never lived in the US and my partner is only Canadian so I don't have to worry too much about the details.  My impression was that when the money comes out it's taxed for the kids, which could be an issue depending on the source of that money. But if it's just taxed as misc. income, maybe it doesn't matter?
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Prairie Stash

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Re: Maximizing opportunities for the kids
« Reply #17 on: October 06, 2017, 01:12:32 PM »


But since that isn't available to us, it makes more sense to me to just save / invest the money the way we already are, and if my mind or circumstance changes, I can always gift him the cash in the future or pay for his education myself. I don't need to set aside a separate account just for that purpose (since there's no benefit apart from organization at this point). (much like the VTSAX holding you referenced).

Its available, you get the RESP registered in your name(a friend, a sibling, a parent, whomever) for the child, there is no requirement to have the RESP registered to either parent; grandparents are often registered wen they use it to gift money. The RESP can be used for living expenses, such as rent or food, if the child attends school on full scholarship. There is no requirement that it be spent on school, the requirement is they must attend school. I hope my own children get scholarships and live at home for school, all the RESP money becomes a start up fund for their first business. Or covers the living expenses if they can't live at home.

Basically the RESP can be set up to get a 20% match on all child savings provided the kid attends a year of school; trade school, culinary, university, business, online classes from an accredited school, whatever. They can attend a German school, for a minimum of 13 weeks (4 months) and you can use the money for rent, flights, food etc. Its just a 20% topup and after that is treated the same as any other investment account.

As for taxes...if it matters the kid can forgo US citizenship. At 18 they wander into the consulate and give up american citizenship, its pretty easy, they'll still be able to travel in the same manner as any other Canadian or German would.

CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #18 on: October 06, 2017, 01:33:22 PM »
Quote
As for taxes...if it matters the kid can forgo US citizenship. At 18 they wander into the consulate and give up american citizenship, its pretty easy, they'll still be able to travel in the same manner as any other Canadian or German would.

Not that easy to give up US citizenship (specifically you're not allowed to do it for tax purposes, though they'd have to prove it). Besides, for the sake of what, like a $5k top up from the gov? I don't see the point of giving up the ability to live and work in the US if the kid wants to.

Thanks for the input, but as mentioned before, this is getting off topic...

Chrissy

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Re: Maximizing opportunities for the kids
« Reply #19 on: October 06, 2017, 02:31:35 PM »
I think you've got it pretty much covered!

We've made languages a priority ourselves.  Our DD is 19 months and attends a morning Montessori toddler program with Spanish.  She has a Spanish speaking nanny and had a French-speaking nanny for the first year.  We also did some basic baby sign language.  Thus far, she responds to commands given to her in all three spoken languages, though my husband and I only speak English.  She communicates to us mostly with sign-language, and can pick up a new sign instantly if she finds it useful (like the sign for crackers!).

Prairie Stash

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Re: Maximizing opportunities for the kids
« Reply #20 on: October 06, 2017, 02:46:09 PM »
Quote
As for taxes...if it matters the kid can forgo US citizenship. At 18 they wander into the consulate and give up american citizenship, its pretty easy, they'll still be able to travel in the same manner as any other Canadian or German would.

Not that easy to give up US citizenship (specifically you're not allowed to do it for tax purposes, though they'd have to prove it). Besides, for the sake of what, like a $5k top up from the gov? I don't see the point of giving up the ability to live and work in the US if the kid wants to.

Thanks for the input, but as mentioned before, this is getting off topic...
$7,200, that's the topup, the 20% match they give, for free. If you want your child to have $7,200 in free money, its easy. If not, don't. There is really no excuse other than your personal preference, I think this thread has adequately addressed every claim of impossibility. The tax bill to the IRS on the RESP can be around $0, not sure why there was concern about taxes, you previously linked why your wife shouldn't be the subscriber but that has nothing to do with you being the subscriber, the article linked even recommended that you have an RESP, in your name.
"It's definitely complicated:
http://www.advisor.ca/tax/tax-news/be-careful-with-resps-for-u-s-persons-211279    "

I'm trying to make sure all misconceptions are clear. The RESP is free money, no future taxes in most cases (even for dual citizens) and can be used to pay for flights to a German university as well as rent and food.

"Unfortunately, this is an area where the IRS has provided little guidance. In our view, the simplest approach would be to avoid naming a U.S. person as subscriber to the plan and instead have another family member (e.g., spouse, partner or parent) consider subscribing to an RESP. This alleviates any concern over the tax issues described above or uncertainty over how to meet the IRS disclosure requirements. However, any U.S. client who remains a subscriber should obtain qualified advice from a professional, who will take a position and support that position on your client’s behalf." As the non-american subscriber, that means you hold the RESP. No problems according to the information you provided.

CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #21 on: October 06, 2017, 04:01:40 PM »
Thanks. I never said it was impossible, merely that it can be difficult and complicated because it is, due to cross-border considerations. And that in my case, it doesn't make sense. If it does in someone elses, have it.

As the article also mentions, talk to a crossborder tax specialist, which I have. I'm going to go ahead and trust him on his assessment that it's not the best use of funds in our situation. I caution others in the same situation to at least talk to an accountant about it because it can be easy to make a mistake with these things and everyone's financial situation is different.

From another article:
"However, if the child is a U.S. citizen or resident, the accumulated income is taxable to the child upon withdrawal of the funds.  A special prescribed tax and interest charge is calculated based on the accumulated income distributed from the plan, which achieves roughly the same result as if the income were taxed as it was earned over the life of the RESP."

So, you may get the $7200 bonus, but the child does get taxed on it, and has to do a bunch more accounting. Maybe it's worth it, maybe it's not, but again I suggest talking to an accountant to be sure of the best way forward for each individual.

Prairie Stash

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Re: Maximizing opportunities for the kids
« Reply #22 on: October 06, 2017, 05:05:52 PM »
Thanks. I never said it was impossible, merely that it can be difficult and complicated because it is, due to cross-border considerations. And that in my case, it doesn't make sense. If it does in someone elses, have it.

As the article also mentions, talk to a crossborder tax specialist, which I have. I'm going to go ahead and trust him on his assessment that it's not the best use of funds in our situation. I caution others in the same situation to at least talk to an accountant about it because it can be easy to make a mistake with these things and everyone's financial situation is different.

From another article:
"However, if the child is a U.S. citizen or resident, the accumulated income is taxable to the child upon withdrawal of the funds.  A special prescribed tax and interest charge is calculated based on the accumulated income distributed from the plan, which achieves roughly the same result as if the income were taxed as it was earned over the life of the RESP."

So, you may get the $7200 bonus, but the child does get taxed on it, and has to do a bunch more accounting. Maybe it's worth it, maybe it's not, but again I suggest talking to an accountant to be sure of the best way forward for each individual.
The RESP works exactly the same for you as it does for every other Canadian (its your wife that is American). When your child turns 18 they will have to file American taxes, but the 20% far exceeds what they'll owe (if they even owe anything given standard deductions, university credits etc.).

This is your exact scenario and the author sees it differently.
https://beta.theglobeandmail.com/globe-investor/personal-finance/taxes/if-youre-a-us-citizen-beware-these-tax-traps/article9747664/?ref=http://www.theglobeandmail.com&

BMO outlines the taxes owed, its $0 for the first $36000/year of gains (Can an American hep out on this, assume its all gains/dividends taxed in the hands of an 18 year old student). So on $7200 its $0 owed by your child. Interestingly, the highest rate is 20%, if the child has gains over $400,000.
https://www.bmo.com/pdf/nesbitt/USCitizensLivingInCanada_Eng%20-%20BMO%20NB.pdf

You must be the subscriber and the tax liability is most likely in the range of $0. Feel free to provide data where I'm wrong, this is just the second opinion you came to the forum for. If your financial advisor was correct, that's great. If he's wrong and I'm correct, that wouldn't be the first time that an advisor was found to have given poor advice.

I really can't see how getting a guaranteed 20% and then paying US taxes would leave you worse off though, any other form of saving is subject to tax in your pockets, at least the RESP is taxed in the hands of a student. I think you just don't want to start a education savings account at all, which is fine.

CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #23 on: October 06, 2017, 05:19:35 PM »
Quote

I really can't see how getting a guaranteed 20% and then paying US taxes would leave you worse off though, any other form of saving is subject to tax in your pockets, at least the RESP is taxed in the hands of a student. I think you just don't want to start a education savings account at all, which is fine.

Once again - I'll trust my specialist accountant who has my whole financial picture to go from. He's not some "investors group" financial guy. He's one of the leading cross border tax experts on the west coast. There are other factors to consider when self-employed that I won't get into here.

I do think you posted a lot of great information that others can refer to, and may be more applicable in their situation.
« Last Edit: October 06, 2017, 05:22:21 PM by CanuckStache »

Goldielocks

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Re: Maximizing opportunities for the kids
« Reply #24 on: October 06, 2017, 06:00:49 PM »
RESP -- double check the rules, but the program is quite a nice bonus.
If the non US parent sets up an RESP, alone, why would it be taxed if you don't file US taxes jointly?
OR, could a grandparent or someone else set it up and contribute to it?
Know that many US schools qualify for RESP payments, the program is quite versatile in how you withdraw money too, and many types of school qualify, as long as FT (80% load) is taken.

My husband is a dual citizen. We file our taxes married, filing separately. The RESP account is under my name alone. It doesn't affect DH's US taxes and is not considered as income for him. I sock away the max amount of contributions allowed there for the 20% govt match. I do plan to pay for tuition for my kids and whatever is not spent from that account, I plan to claw back from my kids (i.e. get my kids to withdraw it and hand me the cash haha). I started discussing this with my kids from the time they were about 12/13 so they won't be blindsided when the time comes and understand what I will/won't cover.

Actually,  your original contributions are always considered to be yours.  You can take them back directly at any time without involving your kid.

The only amounts that are considered to belong to the kids are the CESG money (can only be handed over with proof of full time school, so it is actually considered to still be the government's money until handed over), and the Accumulated income (which combined with CESG, may end up to be worth half the portfolio...)...   

You (the parent) can also claim back the Accumulated income directly, once your kid is over 22 (double check the age), and won't use it, as long as you have RRSP room to roll it into, and doing it this way, you are tax and penalty free.   

The CESG money maxes out at $7200 per kid, so most kids will be able to spend that anyway if they go to school FT..pretty much anywhere. if it is not claimed, then it goes back to the government.

As to the concern about US citizen, I think that IF the poster is filing US taxes separately, then taking elaineamj's route is the way to go.  Yes, the kid is taxed on it when the CESG and Acc. Income is distributed to them* BUT -- this really is no different in taxation than if the kid is earning money at a part time job -- they will be filing the US tax return anyway for the kid; the RESP payouts that are taxed are taxed in canada as well as the USA, and there should be nothing new or complex to worry about just because the kid is US citizen.  Hopefully they work part time by then anyway.

The accountant's concern is related to the US parent holding the RESP as the subscriber, and the cost to prepare the tax returns each year  from now until age 22, being far more expensive than the $7200 lifetime cap on the grant money....but as noted, you can elect to have the 100% Canadian or a grandparent (or close friend if you trust them) do this instead, and still get the RESP free money for your kid and bypass this.


*(at TD, they can not only pay one (CESG) and not the other (AIP), they are mixed and called EAP (Education Payment)!).  But the original contributions are always separated out.

« Last Edit: October 06, 2017, 06:15:37 PM by Goldielocks »

MrThatsDifferent

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Re: Maximizing opportunities for the kids
« Reply #25 on: October 15, 2017, 01:35:17 AM »
Downside to the US passport, he’ll have to file a US tax return every year when he starts working. And if he spends more than a certain amount of time in the US he’ll lose the ability to claim $100k foreign credit. Maybe the laws will change when he comes of age?

formerlydivorcedmom

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Re: Maximizing opportunities for the kids
« Reply #26 on: October 18, 2017, 12:27:29 PM »
I have reservations about spending money on swim classes for a four-month old.  You can teach him to be comfortable in the water without an instructor. 

To me, that just seems like a waste of money for the illusion of safety.
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CanuckStache

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Re: Maximizing opportunities for the kids
« Reply #27 on: October 18, 2017, 12:34:39 PM »
It's more about the social aspect. Of course I can put him in the tub at that age and get the same effect in terms of exposing to water / swimming. But for the $50 or whatever it costs for several 'lessons' it gets us out of the house and lets us meet other parents too.

I have reservations about spending money on swim classes for a four-month old.  You can teach him to be comfortable in the water without an instructor. 

To me, that just seems like a waste of money for the illusion of safety.

formerlydivorcedmom

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Re: Maximizing opportunities for the kids
« Reply #28 on: October 18, 2017, 12:41:44 PM »
When I first brought my kids to swim class (when they were 4 years old), we weren't really able to socialize with the other parents - it was all about keeping our kids from drowning!  (Granted, 4 year-olds are actively trying to drown themselves, unlike infants.)

You might look into free play groups or meet-ups for parents in your area.  I also met other parents just by hanging out at the local park and pushing the kiddos on baby swings.
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elaine amj

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Re: Maximizing opportunities for the kids
« Reply #29 on: October 19, 2017, 08:03:51 AM »
When I first brought my kids to swim class (when they were 4 years old), we weren't really able to socialize with the other parents - it was all about keeping our kids from drowning!  (Granted, 4 year-olds are actively trying to drown themselves, unlike infants.)

You might look into free play groups or meet-ups for parents in your area.  I also met other parents just by hanging out at the local park and pushing the kiddos on baby swings.

In our area, there were free drop-in playgroups sponsored by the province. It was SO nice to have a place to go hang out with other moms where the little ones could play. Our libraries also offered a bunch of mom and baby/toddler classes where I could meet folks too. Loved it. And all free. Unfortunately no little ones at the local parks near where I lived at that time. Thinking back, I was struggling so much with loneliness and isolation that I ended up forming an online forum focused just on parents in my area (primarily so I could meet people lol). That soon expanded into planning events targeted at parents. And became a part-time business that I was eventually able to sell. So instead of spending money to avoid isolation, I ended up making money of it :) First time I've ever looked at it like that haha.
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AmberTheCat

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Re: Maximizing opportunities for the kids
« Reply #30 on: October 23, 2017, 09:14:57 PM »
oh my - so many thought's i'd like to share about college and savings -- but i'll let you figure that out.

here's my thoughts on "opportunities" --
1) swim lessons are superfluous.  Do it on your own! take advantage of freebie baby-kid events; save the bucks. (I've taught mom/me swim classes. never saw the point!)
2) buy items from "gently used" kids sales/stores etc.
3) sell your items at these kids places. could be stores, pop up places, craigslist - ETC. AND -- here's what we've done for 15 years -- deposit all of that money in an account for the kid. It's fun to see that grow.
4) when you see something (clothing/coats/shoes) you LOVE and will need and it's on super clearance, buy it in a size or two bigger for the next year and store it. Kids ALWAYS change sizes each year, and you'll have your item ready when you need it.  ** Don't buy too much for each season; they grow out it all quickly!
not young, but newbie here!