In-Trust Accounts for Children in Canada

Who reports interest, dividends and capital gains?

Income Tax Act subsection 74.1(2) can attribute income from transferred or loaned property back to the contributor. It covers a minor who does not deal at arm’s length with that contributor and expressly includes a niece or nephew. This is not a rule limited to parents and grandparents.

The provision concerns a child who has not reached 18 by the end of the year, subject to its conditions and exceptions. That federal tax test is separate from the provincial or territorial age of majority and the legal arrangements for accessing an account. Residence and the origin of each contribution can affect the outcome.

There is therefore no blanket promise that capital gains belong on the child’s return or produce no tax. The contributor, trust and beneficiary may have different reporting obligations. A tax professional can assess the actual documents and transactions; an account balance or a T3/T5 slip alone is not a complete assessment.

ITF vs RESP: compare the rules, not a promised return

An RESP is a registered education savings arrangement; an informal in-trust account is not an RESP. These are different structures, not interchangeable labels. The relevant comparison includes contribution limits, education-related benefits and withdrawals, ownership and reporting—not a universal winner.

• RESP contributions: since 2007, there has been no annual contribution limit. The lifetime limit is $50,000 per beneficiary across all RESPs. Annual grant limits are separate from contribution limits.
• Relatives can participate: CRA states that anyone may contribute with the subscriber’s consent, subject to plan requirements and the lifetime limit. An aunt or uncle is not automatically excluded. Family-plan beneficiary restrictions are a different rule.
• Withdrawals need their own review: a return of contributions and an educational assistance payment are not the same transaction. Do not assume that every RESP withdrawal requires school enrolment or has the same tax treatment.
• ITF questions: confirm the account’s legal structure, ownership and reporting with the institution. It does not acquire RESP grant eligibility merely because the beneficiary is a child.

Continue with the RESP guide and the distinction between contribution withdrawals and educational assistance payments. Those questions help compare arrangements without selecting investments for a family.

Five questions before opening or funding an account

1. Who contributed? Keep the name, date, amount and source for each transfer; do not merge different contributors’ records.
2. What was transferred? Keep cash records, investment statements, transaction costs and adjusted cost base records.
3. What rights remain? Ask who owns the funds, who may authorize transactions, and whether money can be returned to the contributor.
4. What happens as the child grows up? Ask the institution about documentation and access, then obtain advice on the applicable provincial or territorial law.
5. Who reports what this year? Confirm income, gains and any trust-return requirements with a tax professional. Do not infer an exemption from the word “informal”.

This checklist is a record-keeping aid, not a recommendation to open, close or fund an account. It also does not identify a suitable investment or predict a tax saving.

Frequently asked questions