TechnologyLeaving an inheritance for your grandchildren

11:31  08 november  2018
11:31  08 november  2018 Source:   moneysense.ca

Tax-free way to pass on an inheritance while still alive

  Tax-free way to pass on an inheritance while still alive Sabina wants $30K to be used for her grandkids’ education. Should she transfer it to her son’s RRSP?—John

New International Version A good person leaves an inheritance for their children 's children , but a sinner's wealth is stored up for the righteous. Contemporary English Version If you obey God, you will have something to leave your grandchildren .

Leave An Inheritance . Certainly, as parents the wrong attitude would be to spend all we have in order to enjoy it before we die. I agree. I think the best idea is to put it into a college fund for either children or grandchildren . I guess a will is something that has to be continuously updated depending on how

Leaving an inheritance for your grandchildren© Used with permission of / © Rogers Media Inc. 2018. (Shutterstock)

Q: My mother has just sold her home and is wanting to open an account for her grandchildren for the purpose of purchasing a home or higher education.

My sons are 14 and 11 (her grandchildren).

What would the best investment account be for her to put the money in and leave it until the boys are of age?


A: Given how much “senior” wealth is tied up in real estate in Canada, I think there are going to be a lot of grandparents with similar opportunities as your mother, Dan.

First things first, I’d want you to question your mother about whether she can afford to gift money to her grandchildren. It’s the first question I’d ask her if she were my client or my mother and considering this. If we’re talking about a small amount, especially small relative to her assets, maybe it’s not a big consideration. I just think parents and grandparents need to beware benefitting their kids and grandkids to their own detriment, despite their best intentions.

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Learn how to leave a larger inheritance that is protected for your children and grandchildren by taking steps to ensure that your legacy is not lost to divorce, bankruptcy or claims of creditors. Dennis Sullivan is dedicated to helping people and their families. The Estate Planning and Asset Protection

Learn the details of leaving an inheritance behind. Generally, the older your grandchildren are, the more likely they are to use their inheritance over time. Young adult grandchildren may be better recipients than babies, as leaving money to underage children must be under the care of a custodian.

Ask a Planner: Leave your question for Jason Heath »

One option in a case like this is for your mother to consider a bequest in her will for a certain dollar amount or percentage of her estate to be allocated to her grandchildren. If they were under a certain age – the age of majority in their province of residence, age 21, age 25, etc. – the funds could be held in trust until they attained the desired age. Otherwise, the funds would be paid outright to them if they were old enough.

Depending on her wishes and the size of the bequest, she could even have certain parameters like the funds could only be paid prior to a certain age if they were being used for a specific purpose, like education, for example.

A bequest in her will wouldn’t result in any money being allocated to the grandkids until after her death. She would continue to manage the money as if it were her own, simply knowing that a portion would directly benefit her grandchildren down the road. If she wanted to literally hand over the money today, I’d strongly consider a Registered Education Savings Plan (RESP).

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“A good man leaves an inheritance to his children ’s children ,” Solomon told his son (Proverbs 13:22). Interestingly, grandparenting is one of the few stations in And teach them to your children and your grandchildren ” (Deuteronomy 4:9). While the primary influence on a child is to be the parents, this

An RESP account can be used to save on a tax-deferred basis for your children’s education. The government will make matching contributions of 20% on her contributions – so-called Canada Education Savings Grants or CESGs – subject to annual and lifetime maximums. In some cases, based on your income and province of residence, the contributions may even qualify for additional government grants beyond the initial 20%.

You mother, Dan, could be the subscriber and be “in charge” of the account, or it could be you. An RESP can be used for a broad selection of post-secondary educational options, beyond just college or university.

If your mother wanted to consider a substantial gift for your kids, and wanted to make the gift now, I might consider an inter vivos family trust in addition to an RESP. A family trust is established with a lawyer and requires a trustee or trustees to hold assets for a beneficiary or beneficiaries. The trust would set out parameters around payment of trust funds to the beneficiaries. An inter vivos trust is one that is set up during one’s life, as opposed to a testamentary trust that is set up on death in a person’s will.

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Read ideas on leaving an inheritance that isn't just money. While he spoke of an inheritance financially, there are other types of inheritances we leave with our children and then our children ’s children . The best inheritance or legacy we can leave for our children and grandchildren .

So, what are your options for leaving an inheritance to your children or grandchildren ? There are four primary considerations. Income and principal are to be paid in the trustee’s discretion for the health, maintenance, education, and support of your child and your grandchildren .

The potential structure and tax implications go beyond the scope of my answer today, Dan, but suffice to say a trust may be an option if the potential gift was large enough. If your mother had significant assets, well beyond that needed to comfortably fund her own retirement, she could even consider a family trust that could legitimately move investment income from her tax return onto the tax returns of other family members like you, your siblings, or her grandchildren.

This type of trust is highly dependent on her ability to fund her own retirement, her income and tax rate, other family member’s incomes and tax rates, her estate wishes, and numerous other factors.

As far as what type of investments to buy, regardless of the approach she decides upon, I’d say it depends. Your kids are 14 and 11 and the oldest could need the money within 4 years or less. That’s a short timeframe to take on too much risk.

I don’t think there is a magic answer as far as what type of investment to buy with the potential gift, so I’d really be inclined to focus on the method by which to make the gift first and foremost.

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But we also asked readers to tell us if they are leaving an inheritance for their children and how their decisions have affected their finances and family. His wife, Nancy, 66, left her jobin 1982 when they had their first child . They have two children , 33 and 35, and three grandchildren ,4, 7 and 14 months.

When you leave money or property for a child to inherit , arrange for someone to manage it. Providing for your children in case you die prematurely takes more than picking someone to raise them. You should also consider what will happen to any money or property your children inherit from

Hopefully I’ve given you a few of the considerations I’d be contemplating if your mother were my client or my own mother, Dan. Good luck.

Ask a Planner: Leave your question for Jason Heath »

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.


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