Family Transfers Can Have Tax Effects

Previously published in The Fund Library

Looking to give major gifts of property or investment assets to family members? The good news is that unlike the U.S., Canada does not have a gift tax on transfers of money or property to your family. But you're not getting off unscathed. There are a variety of other tax rules that can be triggered by a gift to your spouse or kids. Here's what to watch for.

Obviously tax rules related to gifts would not apply to typical gifts such as a sweater or an iPhone. But it gets tricky when you want to give, say, the cottage to your kids, or a large amount of cash to family members so they can invest on their own.

Subject to certain exceptions, the tax rules have two main purposes: 1) to ensure that the Canada Revenue Agency collects the tax on any accrued gain; and 2) to prevent "abusive" income-splitting transactions among related persons.