Q. Can we gift cash to our children tax-free? What is the limit on this? And secondly, can we gift property (our home and an investment condo) to our children tax-free? Please let us know.
— Ray and Sabina
A: Hi Ray and Sabina. The good news is you can gift cash to your children with no tax consequences to yourself or the children. This is an excellent way to help your children with immediate cash needs or to reduce your estate while you are alive.
That’s the easy answer, however, in my experience, there is always a reason to dig a little deeper on a question like this. Are you gifting all your children equally? If one child is receiving their inheritance early due to unforeseen circumstances, is this child fully aware that your estate will exclude them? Do you want to attach some strings to the gift—for example, you don’t want a child’s spouse to have access to the cash? Is this cash superfluous to your retirement needs?
Gifting your home will be a deemed a sale in the eyes of CRA but as your principal residence, there are no taxes owing by you or your children. Again, I urge caution with doing this. Transferring the house into the name of several children could lead to problems down the road as siblings don’t have the same behaviour when it comes to money and assets and of course, life happens.
Transferring your condo investment property will trigger capital gains for yourself. You will be deemed to have sold the property on the date of transfer at the fair market value (FMV) of the property and this will result in a capital gain to you. The FMV will be the deemed cost of the property to your children. If any of your children live in the condo as their principal residence then they will be exempt from paying capital gains when they sell the condo, but the other owners will pay capital gains.
Theresa Morley, CAP, CA is a partner with Morley Chartered Accountants in Barrie, Ont. She blogs at MorleyCPA
MORE ABOUT ASK A TAX EXPERT:
- Tax-free way to pass on an inheritance while still alive
- Are RRSP contributions worth it at age 70?
- How to minimize tax on the sale of a condo
- Simplify your investments to save on estate tax