INVESTMENT PLANNING
You may have been shocked at just how much your kids raked in over this past holiday season. Clearly, giving cash in lieu of “stuff” is becoming more commonplace. Between those gifts and extra hours on the job in December, your young tycoons might be sitting on a sizeable sum. What can they do with that money besides fritter it away? They can invest it (or at least some of it).
Mutual funds are ideal in these situations because they offer instant diversification, you don’t need any investment experience, and there’s no need for ongoing management. There are many funds with brands that youth will recognize and may already support with their purchasing power.
And unlike a bank account, the balance isn’t connected to their debit card. Needless to say, this reduces the likelihood that their investment will be spent at the mall or online. If your young person is over the age of majority, he or she can hold that mutual fund in a TFSA and enjoy all the same tax-saving benefits you do.
If your youth is a minor, you’ll need to open the account “in trust” for him or her. Interest and dividends earned in an in-trust account will be attributed back to you for tax purposes, but capital gains are not. If capital gainds are realized down the road, they’ll be taxed in your child’s hands, at a rate that’s probably much lower than your own.
If you’re looking at a significant amount to invest for your child, you may want to consider setting up a formal trust. The benefit here is that you get to dictate the trust’s parameters, such as when the beneficiary can access the funds or how they can be spent. Note, however, that there would be setup fees as well as ongoing expenses in administering the trust.
We’d be happy to explain your investment options and help you make the choice that’s best for you and your child.
Larry Kleinmintz, R.H.U., T.O.T., M.D.R.T.
This newsletter is sponsored in part by Dynamic Funds. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performances may not be repeated. Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.
This newsletter has been written (unless otherwise indicated) and produced by Ariad Communications.
© Ariad Communications. This newsletter is copyright; its reproduction in whole or in part by any means without the written consent of the copyright owner is forbidden. The information and opinions contained in this newsletter are obtained from various sources and believed to be reliable, but their accuracy cannot be guaranteed. Readers are urged to obtain professional advice before acting on the basis of material contained in this newsletter. Readers who no longer wish to receive this newsletter should contact their financial advisor. ISSN 1205-5840