In-Trust-For accounts
In-Trust-For accounts are a kind of informal trust; generally arranged for the benefit of minor children. As compared to a Registered Education Savings Plan (RESP) however, there is no restriction on contributions. Further, proceeds may be used for any purpose, not just for costs related to a child's post-secondary education. Unfortunately deposits to an In-Trust-For account are ineligible for the Canada Education Savings Grant (CESG) and investment returns are not specifically tax-exempt, yet there may still be opportunities for significant tax savings...
Generally, taxes due on interest and dividend income earned on the "original" investment attribute to the parent. Capital gains and any income earned from reinvested interest or dividend income (second generation income) will be taxed in the hand of the child; often at a significantly reduced rate. Where deposits to an In-Trust-For account are derived from Child Tax Benefit payments or from an inheritance, related interest and dividend income will be taxed solely in the child's name.