Author Topic: Informal trust accounts for kids ala couch potato  (Read 2093 times)


  • Stubble
  • **
  • Posts: 125
  • Location: Vancouver Island
Informal trust accounts for kids ala couch potato
« on: October 10, 2013, 02:06:38 PM »
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 Im right.  Ive come to understand that in order for informal trusts to be worth 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? Were 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.


  • 5 O'Clock Shadow
  • *
  • Posts: 89
Re: Informal trust accounts for kids ala couch potato
« Reply #1 on: October 10, 2013, 03:49:41 PM »
That seems reasonable. I might go a bit easier on Canadian stocks, given the size of Canada's economy versus the rest of the world? After all, you want to diversify across the entire world economy, and not unnecessarily bias yourself because of where you happen to live. (Not that there's anything wrong with Canada!)

I always use FutureAdvisor to suggest portfolios, and I'm a big fan of it:

In the US, banks/brokerages offer UTMA/UGMA accounts, UTMA/UGMA being the "Uniform Transfer/Gift to Minors Act", a law adopted by most (all?) states, that let you act as the "custodian" for your kids' money until they turn 18 (21 in some states). This is how my grandparents gave me stocks and mutual funds when I was young. I don't know if there's a similar arrangement in Canada, but I'd imagine there is.