Building wealth that lasts three generations

Every decision in this guide belongs to one of four stages. Families get into trouble when they skip one, usually the second.

The RESP

Contribute CAD 2,500 a year for a child and the federal government adds CAD 500. The lifetime grant is CAD 7,200, so it takes a little over fourteen years of full contributions to collect it all. If you start late, you can catch up one extra year at a time: CAD 5,000 in a year collects CAD 1,000. The lifetime contribution limit is CAD 50,000 for each child. Growth is tax-sheltered, and when it is withdrawn for school, the grant and growth are taxed in the student's hands, usually at little or nothing.

Attribution

If you give money to a child under 18 to invest, the interest and dividends are generally taxed back to you. Capital gains are not. That shapes what a child's account should hold.

The real inheritance

Children who have handled small amounts handle large ones better. Pocket money in three jars, a savings goal and the needs and wants conversation are estate planning. Our free kids money kit is built for it.

Once a child is 18, gifts are simple: no tax to you or to them, and income earned afterwards is theirs. The most effective gifts go into accounts that are sheltered in the child's name:

• Their TFSA: CAD 7,000 of new room in 2026, plus whatever has built up since they turned 18.
• Their first home savings account: CAD 8,000 a year, and they get the tax deduction.
• Their RRSP, once they earn enough for the deduction to matter.

For a home, decide whether it is a gift or a loan and put it in writing. A documented loan can be protected if a relationship ends. A gift cannot.

Giving a spouse money to invest does not move the tax: the income is attributed back. What does work:

• A spousal RRSP: the higher earner contributes and deducts, the other spouse owns the plan.
• The higher earner pays the household bills and the lower earner invests their own income.
• A loan at the prescribed interest rate, with interest actually paid each year. Set up properly, the investment income is taxed to the borrower.
• Pension income splitting in retirement.

A company changes what is possible.

• The Lifetime Capital Gains Exemption. Up to CAD 1,250,000 of gain on the sale of qualifying small business corporation shares can be exempt for each individual who owns them. A company has to meet specific tests in the years before a sale, so this is planned, not discovered.
• An estate freeze. You exchange your growth shares for fixed-value shares. Future growth accrues to the next generation or a family trust, and your eventual tax bill stops growing.
• A holding company. Profit can move up out of the operating business, away from its risks.
• Insurance owned by the company can fund the tax at death or a buy-out.

Paying family members from the company has its own rules: salaries must be reasonable for real work, and dividends to family can be taxed at the top rate under the split income rules. None of this should be set up without advice.

On death, the tax system treats you as selling everything. A plan decides in advance who pays that bill and with what. The pieces are a current will, beneficiary forms that match it, an estimate of the tax, and cash or insurance to pay it so that nothing has to be sold in a hurry.

The families who do this well also hold a conversation, while everyone is healthy, about what there is and what is expected. It is uncomfortable for an hour and saves years.