How to leave a living bequest to your grandchildren

By fashionlifeshopping 09/02/2022 1517 Views

Question from Claude: I am retired and I have a surplus of funds of $250,000 that I would like to bequeath to my five grandchildren who are between 12 and 18 years old. I would like my donation to be protected from family sharing in the event of separation from a future spouse. What do you recommend: TFSA or RESP?

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Answer: Pascal Larivière, division manager and financial planner at IG Wealth Management, indicates that we must first know where these funds come from. “Is this an RRSP, RRIF or other tax-deferred plan or a non-registered account? In the first cases, this money will have to be taxed before being given to the grandchildren. In the last, since it is net money, there will be no tax impact on this donation itself, even if it is made for the benefit of a minor. Generally, a gift is not taxed if there is no unrealized capital gain,” he explains.

How to leave a living bequest to your grandchildren

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Please note that attribution tax rules may apply in certain circumstances and result in the donor being taxed if sums are placed in the hands of a minor and generate income.

Regarding a possible division in the event of separation with future spouses, be aware that under article 415.3 of the Civil Code, all property received as a gift is excluded from the family patrimony. On the other hand, you have to be able to prove that it is indeed a donation. What's more, if this sum was used to buy a house, for example, and is therefore “mixed” with other assets, it will therefore enter into the family patrimony.

Finally, with regard to the TFSA, you must be 18 years of age or older to be able to hold one. The RESP is an interesting option and allows you to benefit from government grants of 30% on the first $2,500 contributed each year. We can nevertheless catch up with the subsidies of a non-maximized past year at a time.