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SIN
NUMBERS FOR CHILDREN
"In trust" accounts are a common way that parents and
grandparents put money aside for the future use of their children and
grandchildren. This is a tax-effective form of income splitting.
The tax rules for this type of account
differ depending on the "source" of the money. All dividends, interest and
capital gains are taxable to the child if the source is the Child Tax
Benefit.
Dividends and interest on accounts that are gifts are taxable to the donor.
The capital gains are taxable to the child.
Most of the return on international equity
funds, the preferred choice for this type of account, consists of capital
gains. The result is little or no tax for these accounts.
In order to keep your records straight, we
recommend that you apply for a Social Insurance Number for any children who
have these accounts. This will minimize the risk of challenge in case Revenue
Canada requests more information.
A S.I.N. can be obtained free-of-charge
from your local federal
Human Resources Development office. Let us know when you receive the number.
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