Passing assets to children can be a great way to transfer wealth while also reducing the size of an estate, writes Meera Raman.Jirsak/iStockPhoto / Getty Images
The deadline for filing taxes in Canada for 2026 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here.
Passing money or assets to children or grandchildren can be a great way to transfer wealth during your lifetime while also reducing the size of an estate. Even though Canada does not have a gift tax, some gifts can trigger unexpected tax consequences.
In general, a gift is considered a voluntary transfer of money, property or other assets, including stocks, cash and real estate, with no expectation of something in return. Gifts are generally assessed at their fair market value, which determines whether any tax may apply.
The Globe and Mail spoke with experts about the tax considerations for family gifting in Canada. Here’s what you need to know:
Cash gifts
“The easiest thing to gift is just cash,” said Greg Keith, a certified financial planner at Wealth Plan Atlantic. That’s because Canada does not impose a tax on cash gifts. A cash gift can be given through cash, cheque, wire transfer or e-transfer.
However, if you give cash to a minor child, and that cash earns income, such as interest or dividends generated from investments, the Canada Revenue Agency may attribute that income back to you, meaning you would be taxed on the gains, Mr. Keith said.
Capital gains tax
For gifts other than cash, the CRA may treat the transfer as a deemed disposition, meaning you are considered to have sold the asset at its fair market value at the time you give the gift, said Jeff McCartney, a certified financial planner at Objective Financial Partners.
The person giving the gift may have to report any capital gains on their tax return for that year.
“If you have growth on anything that you’re gifting, then you’re going to attract capital gains,” Mr. McCartney said.
Stock gifts
Gifting publicly traded stocks works similarly to gifting other investments. “When you sell a security, it’s going to cost you,” said Marc Henein, a senior wealth adviser at ScotiaMcLeod.
The CRA considers a stock gift to be a deemed disposition, meaning an increase in value since date of purchase may trigger capital gains tax.
The recipient should keep records of the fair market value on the day the shares were transferred, as that value becomes the new cost base when the shares are eventually sold, Mr. Henin said.
Some planners say a simpler option is to sell the shares first, pay any capital gains tax and then gift the cash proceeds. The recipient can then reinvest the money, including potentially contributing it to a tax-advantaged account such as a tax-free savings account or registered retirement savings plan.
Real estate gifts
Transferring a home or other real estate to someone other than your spouse is also treated as a deemed disposition at fair market value. If the property has increased in value since you acquired it, that may trigger capital gains tax. If the property is your principal residence, it may be eligible for a capital gains exemption.
There may also be a land transfer tax depending on the province and municipality. In many cases, the recipient is responsible for paying the tax based on the property’s fair market value.
Using trusts
Some families use trusts to transfer wealth while maintaining some control over how the money is used. Mr. Henein said this is more common among wealthier families planning to pass down a substantial inheritance.
For many families, it can also lower the overall tax burden because investment income earned within the trust may be taxable to beneficiaries in lower tax brackets, such as children or grandchildren.
Trusts allow parents or grandparents to set conditions around when and how money is distributed. For example, funds might only be released if a grandchild attends university.
