Should you Gift Money, Gift Money Slowly or Gift an Early Inheritance?
Gift Money
Once again ensure your retirement plan has your needs and lifestyle covered first. You can gift your adult child money. All of you must agree there are no conditions and no one can ask for the money back. It is prudent to prepare a document called a “Deed of Gift” documenting the details and your intentions. You build harmony or conflict between your children and spouse with this step. Grievances happen when your estate is being processed and you are not around to clarify your intentions. One party says the money was a gift, the other believes it is a loan to be repaid before the estate distribution, and another says it was an early inheritance thus reducing the inheritance portion for the first child. Typically the income to the recipient is not taxed in Canada but you should review the source of funds and tax implications.
Gift Money Slowly
Your child can open a First Home Savings Account (FHSA)and you could gift up to the $8000 annual limit for 5 years rather than a gift a lump sum. You may find it easier to draw from cash instead of selling investments for a larger one-time gift. Your child will receive a tax deduction which can be reinvested if there is a refund.
Gift an Early Inheritance
You can also choose to provide a “living inheritance”. Rather than your child or grandchild receiving an inheritance when you pass away they receive it during your life. You will benefit from seeing them use your hard-earned estate. To build harmony within your family document this transaction and your intentions in your will or as a codicil.
June 21st The Final Post in this series
PART 4: Should you Loan Money, Create a Discretionary Trust,
or be the Co-signer or Guarantor?
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