Joint gic with grandkids | GIC discussions | Discussion forum

I assume you mean "can we put our grand child's name on a GIC without them being present?" It depends on the FI. As long as you have their SIN, some will let you do it. Others need to meet the individuals involved and have papers signed. Credit unions need to have everyone fill out membership forms. Some will let that happen remotely, others want you all to come in to the branch to do so. Check with any FI you want to deal with for a proper answer.

Because there is no gift tax involved, you could be considering the child's portion of the GIC as a gift and therefor allocate their portion of interest earned to the child's tax return. However, the CRA may question this sequence of events (during an audit) if you have not, in fact, given the actual interest earned to the child. Some people just put their children's or grandchildren's names on investments to avoid inheritance taxes upon the elder's demise. This is okay as long as the true owners of the investments report the resulting income earned on their annual returns. Again, you may want to consult the CRA or an accountant for a more detailed (and accurate) response to this issue.

CRA site info is "Generally, you report your share of interest from a joint investment based on how much you contributed to it."

Bud, re transferring/loaning property (which includes money) to related minors here's the CRA document that will have your answers:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it510/archived-transfers-loans-property-made-after-may-22-1985-a-related-minor.html

Londonguy said

Yes  

Thanks, Londonguy. That was my thought as well, but didn't want to say as I wasn't 100% sure.

Cheers,
Doug

Bud said
Reported income then is property of adult child or minor.
What if it goes into a joint bank account could the parent take it back even after a couple years? I guess not  

Because you're talking about accounts involving minors, applying the technically correct tax treatment can be inconsistent with bank account custody arrangements. Whose property it is may have little relationship to who has access to it.

Also, so-called joint accounts can differ. Some are set up to allow transactions to be executed by ANY of the named parties acting alone (e.g. my spouse and I share a chequing account like that), whereas other joint accounts may require the signature of ALL the parties (rarer).

So if they have the more common "ANY" form of joint account, then yes, the grandparents could rifle the account for the balance any time they wanted. But so could one of the kids one day, and the bank would have no reason to withhold the funds from them.

When it comes to dealing with minors IMO it's much cleaner to just create a paper trail of where the kids got the funds, get them a SIN, and then invest the money in an account in their own name (or their name in trust), including filing them a tax return for the income, even if there was no tax payable. I did this with my own kids back in the day (I opened up individual brokerage accounts for them at TDDI) and everything worked out fine. Only had one hiccup with CRA about a T5 one year that had my SIN on it, but because I had the trail of tax returns it was quickly resolved

Joints accounts are pretty straightforward re taxes, as has been noted. Ignore T5 name and report based on proportion of contribution of funds to the account, GIC, etc.

Londonguy said he opened accounts in his kids' names (i.e. not joint accounts), and "everything worked out". So I'm getting the impression if you buy a GIC or put money into a savings accounts of a child, then the income will not be attributed to you. Makes sense, I suppose, it's a gift at that point. But if you put the account name in trust, as Londonguy indicated he also did, (i.e. parent still has access to the money, no?) I'm not sure that would be treated the same, it's only sort-of a gift, it can be retracted. Or am I wrong in thinking if you open an account in trust for a child that you, the donor/parent, still has access to that account?

Income attribution rules apply the same whether the account in child's name or the account is in parent's name in trust for the child.

With interest rates so low, one could sidestep the attribution by loaning the child the money and charging the child the CRA prescribed rate on the loan. I think the prescribed rate is now 1% per annum.

Careful with the in-trust accounts. Legally, the money now belongs to the child. Taking it back can result in legal issues if the money is not then used for the child's benefit. RetireHappy.ca: Use caution with in-trust accounts for children or grandchildren has more details.

One possibility is that only the first generation interest, the interest each year on the original money, is attributable back. Second generation interest, the interest earned on previously-attributed interest, is not attributed back.

The kids would need to file their own tax return to report the second generation interest.