Canadian parents willing to give adult children leg up to move out

But most do not appreciate the tax and estate planning implications

Canadian parents willing to give adult children leg up to move out
When given the option, nearly two-thirds of parents (65%) would rather give their adult child cash than have their child and the child’s partner/spouse living with them.

That was the finding of a recent CIBC poll that explored gifting trends among Canadian parents. Roughly three-fourths of Canadian parents with a child aged 18 or older (76%) say they’d provide them with financial assistance to move out, get married, or move in with a partner. Among those who’re willing to give support, nearly half would provide an average of $24,125.

However, most respondents (68%) either misunderstand or don’t know what taxes exist on financial gifts.

“Unlike in the US, we don't have any kind of gift tax, which means if you have what's called 'never money' – money you'll never spend in your lifetime – it's worth considering making a financial gift while you're alive to help your kids get started in life,” said Jamie Golombek, managing director for tax and estate planning with the CIBC Wealth Strategies Group.

Respondents were split on whether a financial gift should be tied to milestones or occasions like buying a home, graduation, the birth of grandchildren, or settling down with a spouse. More than half (55%) expressed concern about gifting; two in five of them admitted they’d probably need the money later, and nearly three-tenths (29%) worried that their son or daughter won’t use the money “wisely.”

While 37% of the respondents expressed willingness to take on debt so their kids get a good start, few would actually use their credit lines or borrow from relatives or acquaintances; most of those giving money would prefer to fund gifts with their cash or savings.

A CIBC Capital Markets report forecasts that boomers will collect a total inheritance of $750 billion over the next ten years. The gifting poll found that 74% of parents aged 55 or older would pay the entirety or a portion of their inheritance to their children or grandchildren if they received an inheritance today.

Over half of boomer parents who have given or plan to bequeath a significant gift or early inheritance said they’d feel obliged to give to every child or grandchild, though they would likely not leave the same amount. Most (60%) would not attach any stipulations to the gift, saying what their adult kids will do with it is none of their concern.

“When you gift during your lifetime, you're able to enjoy seeing your beneficiaries use the money while at the same time reaping potential tax savings opportunities,” Golombek said. “In addition, by gifting assets before you die, these assets will not be subject to probate fees because they will not be part of your estate."

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