Strategies for Decumulating in Retirement | Page 2 | General financial discussion | Discussion forum

Alexandre said

If you want to give your children a lump sum of money as a gift, it’s completely tax free. In other words, you don’t have to pay taxes on gifted money, no matter who you receive it from. This is true regardless of whether the giver and the receiver are related or not.

How Much of a Cash Gift is Tax Free in Canada?  

Thanks for the link. So the recipient does not have to pay tax, and the cash given away is NOT subject to estate tax (or any tax) as well if its given away as part of the will ?

One thing that is still confusing is CRA also has a attribution rule. So if I give someone $100k and they earn interest income on it, the income earned is taxed under my tax I think. How do they "monitor" that...

Alexandre said
You spoke about your daughter. If she is an adult (not minor), attribution role shouldn't apply to her, I believe.

One must be careful with monetary gifts, because CRA does not want you to use it as a loophole. If you gift money to someone, it should not be in exchange for goods or services, no matter of their actual value.
If your daughter routinely provides care services for you, does grocery shopping, household maintenance or just helps with taxes - that gift might be considered payment for services.

Unless you are already under taxman microscope, you don't need to be paranoid about it, but always use good judgment. For example, when I gift someone money by writing a cheque, I always put "Gift" in Memo. Same for Interac transfer.
When gifting substantial sums of money I may emphasize to recipient not to give me anything back even as a token of appreciation. Thank you note is OK.

Tax rules for monetary gifts are different between USA and Canada. If you are gifting money from Canada to someone abroad, they may need to check with their tax authorities.  

yeah I am thinking slowly transferring some cash over to my daughter which is now an adult. Sounds like if I just give her $10-20k a year, it will be fine and not be on anyone's radar. Thanks for the explanation.
if anyway, I need her to be "mature" enuf and not to spend it like free money !

To me it also differs depending on how many kids you have. If you just have one vs 3 or 4 then it's probably not as fraught with possibility of it going sideways. I'm generally against the idea, not because of my kids but because of my own views on it in general and from what I've seen with wealthier people I know giving their kids stuff, but I can certainly see how it could work out.

There are no attribution rules re. gifts to adult children, not that CRA has a clue what's going on anyways. And someone mentioned giving via your Will, that's not what we're talking about, i.e. that's a distribution from an estate, not a gift while alive.

Thanks on the update, AltaRed, about tax-free gifting. I know some folks who, before 2000, ran into the limits when terminally ill parents tried to pass the cash on early.
RetirEd

I get that CRA can detect stuff, my point is they never do, or they just don't care, from my personal experience. Though I'd be fine with being proven wrong. I've never met or heard of anyone being caught in these type of attribution rules unless CRA's already got them in their sights for other reasons and then happens to stumble upon this issue too. My impression is CRA is content with the general compliance that results from most people fearing enforcement that never seems to actually happen and letting the rest go, zero effort required on their part to get most to comply anyway.

Loonie said

Answers: 1. They sell their principal residence and invest the money in GICs. 2. They inherit from their 100 year old mother or unmarried sibling. 3. They inherited spouse's million dollar RIF and decided to cash in a whack of it. 4. They discovered that if they moved their money from Old Bank to New Bank or CU, they could increase their income 25-fold. 5. They win a prize in a lottery and buy GICs with the proceeds!

…

That quite an extraordinary taxpayer and family!

Own principal residence by age eight. Mom gave birth to the taxpayer at age 100 - 8 = 92!

Norman1 said
The income attribution rules only apply to below fair market value transfers of property to spouse or related minors. They don't apply for adult children, adult grandchildren, or adult nieces/nephews.

  

Isn’t it true if I add my spouse as joint GIC owner, I still have to report 100% of the income, since I am the sole contributor of the principal ? That’s essentially attribution rule ? Or am I mistaken / misunderstood ?

That's not attribution. That's just joint account interest allocation.

For tax purposes, interest from a joint bank deposit is allocated by the contribution of funds by the account holders.

Attribution would occur if one deposited funds to a spouse's non-joint account without receiving something of the same value in return.

Loonie said
Huh? What are you trying to say?  

I gave an example of the attribution of interest earned by an 8 year old child.

I think you had an 80 year old child in mind instead.

dougjp said
So from the recent discussion, it seems to me the first thing a couple should do for moving money between them is look at unused TFSA room? No increased earnings reported, just a lump sum increase in funds put into a TFSA. Source unknown..   

That is fine until it is then taken out at a later date and if used for investment purposes to gain income, attribution of the investment income is back to the original contributor.