The best ways for Canadian grandparents to gift money involve using registered plans for tax-efficient growth or testamentary gifts to avoid income attribution rules. Top strategies include opening an Registered Education Savings Plan (RESP) for education, purchasing whole life insurance, or using a Will for direct, tax-deferred, and controlled transfers. Direct cash gifts, while simple, may trigger tax consequences if the grandchild is under 18.
Gift Tax in Canada
Canada does not impose a gift tax on cash gifts to family members. You can give any amount of cash to a family member without worrying about a gift tax. However, if you're gifting to a minor child, any income earned from that gift may be attributed back to you for tax purposes.
You may give each grandchild up to $16,000 a year (in 2022) without having to report the gifts. If you're married, both you and your spouse can make such gifts. For example, a married couple with four grandchildren may give away up to $128,000 a year with no gift tax implications.
In Canada, gifting money to children to cover living expenses can reduce estate taxes, but clear documentation is essential. The gift should be explicitly labeled, and agreements signed by all parties to outline expense responsibilities and contingencies like repayment if medical costs arise.
As the recipient, you do not pay tax on a gift of £50,000. For the giver, this would be a Potentially Exempt Transfer. As long as they live for seven years after giving it, it will be entirely free of Inheritance Tax.
The 7 year rule
No tax is due on any gifts you give if you live for 7 years after giving them - unless the gift is part of a trust. This is known as the 7 year rule.
Canada does not have a gift tax.
This means individuals can give cash or property without the recipient paying taxes. However, if you gift property that has increased in value, the giver may need to pay capital gains tax on the increase in value.
Where to store savings for grandchildren
Whether you gift a house in its entirety or sell it to your child for $1, the Canada Revenue Agency (CRA) will assume that you sold it for Fair Market Value (FMV). Unless the home falls under the principal residence exemption, one or both of you will pay capital gains at some point.
Yes, you can give your son $100,000 tax-free in 2025 by utilizing the annual gift tax exclusion and your lifetime exemption, but you'll need to report the gift to the IRS on Form 709 since it exceeds the $19,000 annual limit, though you won't pay tax unless you exceed your much larger $13.99 million lifetime gift/estate tax exemption. The gift is considered yours (the giver) for tax purposes, not your son's.
The earlier you start saving, the better. In many cases, you can open a junior savings account as soon as a child is born. But if your grandchild is older, it's not too late to get ahead with a Junior Pension, First Saver savings account or Premium Bonds.
Step-Up in Basis for Inherited Assets
One tax advantage of leaving assets after death is the step-up in basis. This provision allows heirs to inherit assets at their fair market value at the time of death, effectively resetting the capital gains tax to zero for any appreciation during the decedent's lifetime.
You can add your grandchildren to your will and give them either a fixed amount or a percent of your estate. Setting up a trust for your grandkids may give them lower tax options and may also give you more control over how and when they can use the funds.
In Canada, there is a program you can set up for your grandchild called a Registered Education Savings Plan (or an RESP). This type of untaxed savings account is a great way to provide money for your grandchild once they become an adult.
There are several ways to transfer property to a child tax-free, including leaving it in a will, gifting it using lifetime and annual exclusions, selling it, or placing it in an irrevocable trust.
You can gift a grandchild up to the annual gift tax exclusion amount (around $19,000 per person in 2025/2026) without any tax implications or reporting; gifts exceeding this amount must be reported on a gift tax return (Form 709) but only count against your substantial lifetime gift tax exemption (nearly $14 million in 2025), meaning you likely won't pay tax until you've given away massive sums over your lifetime. Married couples can combine their exclusions to give double.
The best way to invest $1000 for a child depends on your goal, with a Custodial Brokerage Account (UGMA/UTMA) offering the most flexibility for general uses (car, home) and a 529 Plan ideal for tax-advantaged college savings, while a Roth IRA for Kids suits earning children for long-term growth, all leveraging long-term growth potential through ETFs or index funds, with the new "Trump Account" being a specific, limited-time option for younger kids.
Other gifts to children or grandchildren are potentially exempt transfers. If you die within seven years of handing over the money, it will be considered part of your estate and taxed accordingly. But if you live beyond that, the money won't be taxed.
Technically speaking, you can give any amount of money you wish as a gift to one or more of your children or any other member of family. Some parents also choose to buy property and put it into their child's / children's name(s).
There's no limit on how much money you can give or receive as a gift! However, there are some occasions where tax may be payable, or capital gains tax (CGT) may apply. For example, in some instances when gifting property, shares or crypto assets, or when receiving money or an asset from a non-resident trust.
Yes, you can likely give your daughter $50,000 tax-free by using your annual gift exclusion and lifetime exemption, but you'll need to file Form 709 with the IRS to report the gift exceeding the annual limit ($19,000 in 2024/2025). The $50,000 gift reduces your large lifetime exemption (over $13 million in 2024/2025), meaning you won't pay tax on it unless your total lifetime gifts exceed that huge amount; your daughter never pays gift tax on the money.
It's important to note that this annual exemption is your total allowance for a given tax year, which means you could give all £3,000 to one child, or split it between several children.. Note that this is a per person allowance, so both parents may gift £3,000 each per year tax-free.
For 2025 and 2026, the annual gift tax exclusion is $19,000. This means a person can give up to $19,000 to as many people as they without having to pay any taxes on the gifts. For example, a man could give $19,000 to each of his grandchildren in 2025 or 2026 with no gift tax implications.