What is the RBC DS Family Trust?

The RBC DS Family Trust is a fully documented “off the shelf” inter-vivos trust that provides the following three benefits for those clients with low-income children:

  • If the child has no other income, they can earn up to $18,000 of capital gains tax-free every year through the trust. This is because only 50% of $9,000 of the capital gains are taxable which is offset by the child's $9,000 basic personal tax exemption. A parent in the top marginal tax bracket would pay tax of about 20-14% on capital gains depending on their province of residence.

  • The parent is permitted to loan cash to the RBC DS Family Trust so they will never lose access to the loan capital. The minimum initial loan amount is $50,000.

  • Investment income earned in the trust can be used to pay for expenses that directly benefit the child (eg. Private school tuition, post-secondary education costs, lessons, camp etc.)

Which clients would be interested in the RBC DS Family Trust?

The following types of clients would be interested in setting up an RBC DS Family Trust:

  • High income executives, professionals and business owners with minor children or low-income children

  • Parents with children in private school or in expensive sports or lessons

  • Parents with little in education savings or that have started an RESP late

  • Grandparents who want to provide funds to grandchildren

Can the Trust be used to pay for a child's expenses?

Yes, this is possible as long as the expense directly benefits the beneficiary. The CRA has indicated that expenditures made for the child's benefit by the trustee can include amounts paid for the support, maintenance, care, education, enjoyment and advancement of the child, it is important that the expenses can be documented properly and receipts retained.

Although there is no official list from the CRA of expenses that qualify as directly benefitting the child, the following expenses may qualify.

  • Private school tuition

  • Post-secondary school fees

  • Lessons

  • Camp

  • Sports equipment

  • Gifts

Using the trust income on ordinary household expenses or expenses that benefit someone other than the beneficiary will result in adverse tax consequences.

Parents and trustees should speak to their legal or tax advisor for further advice and guidance on this matter before using the trust income to pay for the children's expenses.

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