You don’t need to empty the bank to help your children – or grandchildren – in a significant way. A tax-smart strategy is to give money that children can contribute to a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) or both, provided they have contribution room. It’s especially helpful when children are starting out and have difficulty making their own RRSP or TFSA contributions. By contributing now instead of years later, the investment will benefit even more from compound growth and become a considerable sum over time.
You may want to explain to your child that an RRSP tax deduction doesn’t need to be taken right away. Your child can defer the deduction to a future year when she or he is in a higher tax bracket and the deduction makes a greater impact.
Even if adult children are financially able to make registered contributions, this strategy is still a tax-smart way to transfer money to the next generation. You can fund the gifts with cash, so you’re not redeeming assets that trigger tax on capital gains. And your children are funding tax-advantaged investment vehicles. You might even consider making the gifts an annual practice.
This material was prepared for and published on behalf of your financial advisor and is intended only for clients resident in the jurisdiction(s) where their representative is registered. This material is provided solely for informational and educational purposes and is not to be construed as an offer or solicitation for the sale or purchase of any securities or as providing individual investment, tax or legal advice. Consult your professional advisor(s) prior to acting on the basis of this material. Insurance products are available through advisors registered with applicable insurance regulators. Individual equities are available only through representatives of Assante Capital Management Ltd. In considering any particular investment, please remember that past performance is no guarantee of future performance. Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. Neither CI Assante Wealth Management or its dealer subsidiaries Assante Capital Management Ltd. and Assante Financial Management Ltd., nor their affiliates or their respective officers, directors, employees or advisors are responsible in any way for any damages or losses of any kind whatsoever in respect of the use of this material. CI Assante Wealth Management is a registered business name of Assante Wealth Management (Canada) Ltd. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Assante Financial Management Ltd. is a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation (excluding Quebec). © 2022 CI Assante Wealth Management. All rights reserved.