Estate and Tax planning: Gifts to kids

Estate and Tax planning: Gifts to kids
Good news is Canada has no gift tax, so you can give any amount of cash, and it is entirely tax-free. I would recommend giving away cash during your lifetime. Another option is to give away property or investable assets that have not much appreciated in value. This is smarter move tax-wise, rather than paying taxes on your estate after you die.
If the kids have debt/mortgage: This cash or property can be sold by children to pay off their mortgages or improve their lifestyle.
If the kids do not have a mortgage: It is most likely that they are in lower tax bracket than you. So, by changing ownership of the assets, the annual investment income will be taxed at their lower tax rates instead of being taxed in your name at a higher rate. The potential tax savings vary based on your province of residence but in an extreme example of an Ontario parent with substantial investable assets who is in the top tax bracket and a child with no income, more than $18,000 of annual tax savings can result by having up to $132,000 of income taxed at the child’s graduated rates instead of the parent’s top rate.
If at all you are considering a donation to charity, then it is recommended to donate appreciated shares or appreciated property to the Charitable Institution. On one hand, you will avoid capital gains tax liability, and receive a donation receipt for the fair value of the shares or property. This will give you a non-refundable tax credit that in Ontario for example, is worth up to 46 percent of the donation.
Published by
Joginder Gujral, FCMA (India)
Director, TOCCAI
CMA (USA), FCA (India), CPA, CA (Candidate)
Gift to kids 2

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