Saving for education

Informal “in trust” account

What it is:

  • An account set up “in trust” for a minor that can be used for post-secondary education.
Multigenerational family out for a walk

Who can use it:

  • Everyone – parents, grandparents, relatives, family friends.
High school students walking down a corridor

Main advantages:

  • Money accumulated may be used for education or other purposes for the benefit of the in-trust beneficiary.
  • After age 17, the funds are taxed in the hands of the beneficiary.
  • No formal trust agreement is required.
  • There is no contribution limit.
  • There is no deadline as to when the funds must be used.
Girl on a school bus

Potential limitations:

  • An informal “in trust” account is irrevocable.
  • Rules restrict income splitting on interest, dividends and capital gains with the child prior to age 18.
  • The in-trust beneficiary is entitled to the account at age 18 and can withdraw any or all of the money in the account.
  • Income is taxed annually.
College Chemistry Student Working in Lab

Special considerations:

  • Anyone can be named as a beneficiary.
  • If you invest mainly in equity investments, you can minimize interest.
  • Social Insurance Numbers will be required for beneficiaries to report capital gains.
  • In some provinces, mutual funds are not eligible investments.