Informal Trusts



Christian White

Financial Advisor & Associate Portfolio Manager


Informal trusts, or ITFs, are a tax-efficient way to provide a savings plan for a minor child. These accounts can be used for funding future education, protecting an inheritance or, as is often the case, providing tax savings for the contributing adult.

In most cases, there are 3 parties involved in setting up an informal trust account. The contributor, the beneficiary and the trustee. The contributor is the person or persons investing in the account. The trustee (who can also be the contributor) is the individual(s) who manage the account on behalf of the minor. Finally, the beneficiary is the person(s) who will benefit from the assets in the ITF account.

There are many reasons that one may set up an ITF account for a beneficiary, but the most common is tax savings. Typically, the contributor is in a higher tax bracket than the beneficiary, who is typically a minor. In most cases, the minor is in a much lower tax bracket or not in any tax bracket (below the yearly basic exemption amount).

In a standard ITF account, all the investment income is attributed to the trustee, such as dividends and interest. However, the capital gain is attributed to the beneficiary. In short, many of these accounts are set up in such a manner that all the underlying investments are deferred capital growth-oriented assets such that there is little to no annual investment income other than capital gains that occur due to rebalancing.

If the assets in the ITF account are provided solely by Canada Child Tax Benefit payments, an inheritance, allowance or direct gifts from family members, all income would be attributed and taxable to the beneficiary, not the trustee.

As with any financial strategy, it is vitally important to review your options with your professional advisors to ensure that the approach is suitable based on your short-term and long-term financial plans.

Christian White is a financial advisor with RGF Integrated Wealth Management Ltd. The views expressed are those of the author and not necessarily those of RGF Integrated Wealth Management Ltd., which makes no representations as to their completeness or accuracy.

©2019 RGF Integrated Wealth Management Ltd. | RGF Wealth Management Ltd., Member - Canadian Investor Protection Fund.


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