Joint gic with grandkids | Page 2 | GIC discussions | Discussion forum

I know this approach isn't for everybody but FWIW here's what I did.

I didn't care for RESPs and their investment limitations, so I opened up informal trust accounts at TDDI identified as "Londonguy in trust for Little Londongirl" etc. for each of my children. My address, my SIN, my trading control. Meanwhile I also obtained a SIN for each child (you don't have to be an adult to get one) from RevCan (now CRA).

The accounts were initially capitalized with small amounts that were legitimately theirs (e.g. birthday gifts, Christmas gifts, the old "baby bonus" payments). Details for where the amounts came from were recorded on a spreadsheet, no matter how small. It was pretty slow sledding at the beginning, but interest rates were decent back then, so there was a bit of growth to be had. I also used the accounts as illustrations to help teach them about long term money management.

After a few years I set up some formal loan agreements in larger amounts to beef up the amount of available capital so that we could take meaningful stock positions (the loan attracts interest and has to be repaid, but any income or capital gain that flows from the investment is taxed in the hands of the child). Over time, new capital additions expanded to include their own earnings (e.g. lawn cutting, babysitting, part-time jobs).

On the reporting side, notwithstanding that the accounts and T5s had my SIN on them, I reported the slips and trading activity conducted in their respective accounts on their own tax returns filed under their own SIN, even when no tax was payable. Those returns helped complete the paper trail and generated a series of accurate assessment notices that accounted for everything.

Eventually as they each approached age 18 I collapsed their trust account and the money was used to fund their university

Bill said
That makes sense, you never gifted them any of your money into the account. (Interesting that "baby bonus" was not considered paid to parents, but likely CRA would never even look at that anyway.)  

I doubt I'll be able to lay my hands on it now, but somewhere along the line going back to the 1970s (or maybe even earlier) there was a policy statement or interpretation or whatever floating around that conveyed the notion that RevCan accepted the idea that baby bonus payments were philosophically intended for the child's benefit and could be treated as if they were the child's property for future income tax purposes.

Back in the day I remember a lot of chatter about it between financial planners, because the subject would occasionally get brought up at team meetings where it was suggested that rookie salesmen could use it as a "Hey, do you know you can do this?" type of intro when prospecting for clients.

Fuzzy interpretation or not, any attribution debate became moot in 1992 when Mulroney killed the baby bonus payment and replaced it with a tax credit

Norman1 said
Page 13 of 1990 General Tax Guide says the following in the instructions for Line 121:

Note:

If you deposit family allowance payments into a bank account or a trust in your child’s name, we consider the interest earned on those payments to be your child’s income.

  

Nice find, Norman, I'm impressed