Planning Perspectives

A look at life and finance from every angle.

From personal to professional, from family to financial, there are many facets to your life. Yet, each is interconnected. Planning Perspectives is a source of ideas and information to help you make the most of them all, all together.


What Doors to Open for Your Adult Children

November 13, 2018 Estate, Family, Living Well, Planning Well

Hopefully, by the time your kids reach a point where a major purchase is considered – be it a college education, a car, a wedding, a home, or even a business – you’ve succeeded in teaching them the value of a dollar. This will help them understand the gravity of the decisions you’ll make as you explore how the money they need will be provided – by gift or by loan, for example.

Start Here

Think of your needs first. This might be hard since it’s natural for parents to have an attitude of self-sacrifice when it comes to their kids. But, when it comes to your financial future, there’s no scholarship for retirement. Talk to your financial advisor about what is best for your future, and your children’s.

Giving by Gift

Giving a significant financial gift to children occurs quite often. The Financial Post reported on a poll conducted by CIBC and said that, “the majority (76 per cent) of Canadian parents with a child 18 years or older would give their kids a financial boost to help them move out, get married, or move in with a partner.” When giving significant gifts, tax and family law should be considered. Cash is the most common gift, but securities or real estate can also be gifted.

There are no laws restricting the amount that can be gifted in your lifetime, “inter-vivos” gifts or upon death, “testamentary” gifts.

“In-kind” gifts such as securities or real estate are treated as if the gift has been sold at fair market value, which will constitute capital gains.

While cash gifts don’t automatically have taxes associated with them, any income that is gained from the gift will be taxed.

Cash gifts may save some taxes upon death. Most provinces levy an estate administration tax or probate fee on assets in an estate; they are different across the provinces.

Trusts are a good way to transfer assets and can discussed with your financial advisor.

Giving by Loan

Here are three important things to keep in mind when loaning money:

  1. Even though it’s a transaction between a parent and child, monetary transactions should be treated like business. Make expectations clear. Put loans in writing. This way, everybody can do his or her part to keep relationships cordial.
  2. Loan only money that won’t cause you financial instability.
  3. lf you’re providing a mortgage by co-signing or guaranteeing the mortgage, there are varying degrees of liability.

Manage Expectations – Everybody’s

Expectations can be emotional. For parents, think how you might feel sitting across the table at family gatherings from someone who owes you significant money but is not always on time with payments. Adult children may not know how parents will react if they make other large purchases while still owing money. These things must be discussed in advance. If either side is uncomfortable, a loan may not be a good idea.

Next Steps

Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.