Life is uncertain, and so is the future. Being a concerned and caring grandparent, it can be a great idea to give your grandchildren a gift that can assure the safety and security of their future.
This article brings you some of the most meaningful gift ideas to help you financially secure your grandchild’s future. So, make sure you scroll down to the end to make the most out of it. You can also click here to read about Canada’s top 5 RESP grants.
Know your limitations
No matter how much you care for your grandchildren’s future and wish to contribute to secure their future, the truth is that, unlike a parent, you cannot open a tax-free investment in Canada for your grandchild’s higher education and future.
However, it does not mean you have to give up on your desire to help your grandchildren live a better future life. On the contrary, you can still invest in some-non federal schemes to save for your little one’s future and education. And the great thing is that some of them can even help you save on taxes!
Besides, any grandparent would prefer to set investments to secure their grandchildren’s future, overspending dollars to get them gifts every year. So keep on reading to know more about the options available for grandparents to secure their grandchildren’s future.
Great gift ideas to secure your grandchild’s future
Here are a few gift recommendations to help your grandchildren fulfill their dreams even if you are not around to help them.
A Registered Education Savings Plan or RESP will allow you to set aside a sum that can be used for the beneficiary’s post-secondary education.
The great thing about an RESP is that grandparents can open an RESP for their grandkids even if they already have an RESP because a child can be a beneficiary of multiple plans.
Grandparents can also choose to give money to the parents by offering a gift certificate, which can go towards an RESP contribution for the grandchildren.
However, it is pertinent to mention that the beneficiary would not get any grants if you invest more than $2500 per year in an RESP plan. Therefore, if the beneficiary has multiple RESPs, the contributors must communicate to avoid over-investing.
Moreover, if the lifetime contribution exceeds the $50000 threshold, the excess contribution will attract a tax of 1% each month.
Set up a trust fund
A trust fund is one of the Canadian grandparents’ best ways to gift money to their grandchildren. A trust fund has straightforward liabilities and legalities, which creates a three-way agreement among a settlor, trustee, and beneficiary.
The settlor provides the money, the trustee manages it, while the beneficiary is the one who receives the money. In the instant case, the grandparent shall be the trustee; the grandchild shall be the beneficiary, whereas a settlor (in most cases) shall be a corporation owned by a grandparent.
There are two types of trust funds- Living trust and Testamentary trust.
A living trust is set up when the trustee (grandparent) is still alive. You can also increase the fund value in a living fund by getting more money from the settler or investing funds to yield returns.
A testamentary trust establishes how much money the grandchildren will get after the trustee passes away. A testamentary trust is usually included in a will.
The tax on a testamentary used to be lesser than that on a living trust. However, the present tax rate applicable on aforesaid trusts is the same.
Consider investing in real estate
While most assets’ value depreciates over time, real estate proves to be an asset that accumulates value with each passing day. Therefore, real estate is a great gift option for grandparents to secure their grandchildren’s future financially.
Moreover, real estate has multiple aspects. Your grandchildren can use it for residence in the future. And if not, they can always sell it or mortgage it to obtain financial support for higher education, starting up a business, or any other monetary need.
Purchase a whole life insurance plan for your grandchild
Another great way to ensure the financial security of your grandchildren’s future is to open a whole life insurance plan for your grandchild. It will provide great flexibility, security, and
assistance for your grandchild’s financial needs like higher education, down payment on a new home, or business capital requirement.
While many insurance providers offer such plans, Child Plan by Insurance For Children seems exceptionally promising. Read down below what makes Child Plan so unique.
Why Child Plan Policy?
A Child Plan is a great gift choice to secure your grandchild’s future, which also happens to be tax-free! Even the benefits your grandchild receives through this plan remain tax-free throughout life. It also offers a tax-free annual dividend to the beneficiary for a lifetime.
Here are a few salient features of the Child Plan-
- You can open a Child Plan anytime after two weeks of your grandchild’s birth.
- You can use personal or corporate proceeds to fund the plan.
- Grandparents over 64 years can use RRIF or RRSP to fund the plan
- It helps you save on taxes.
- The dividend your grandchild receives is also tax-free.
- A Child Plan’s value grows throughout the beneficiary’s life from when it is opened.
- You can pre-fund the Child Plan in full to save up to 25%.
- A life insurance plan owner can receive dividends for over 100 years!
- Ownership of the plan is transferable outside the estate tax-free and fees.
Here’s an example to comprehend how the Child Plan works-
Suppose you deposit $250 per month in the Child Plan, then the cash and life insurance value it accumulates for the given period shall be as follows:
- Age 21: Accumulated cash value $84485 & Life Insurance value $606899.
- Age 35: Accumulated cash value $182075 & Life Insurance value $832038
- Age 45: Accumulated cash value $314869 & Life Insurance value $1053479.
- Age 65: Accumulated cash value $911164 & Life Insurance value $1724583.
The living expenses and education fees skyrocket with passing time, essentializing it for the grandparents to do their bit to ensure that their grandkids do not face a scarcity of financial resources to fulfill their dreams.
While a handful of options are available for the grandparents to help their grandchildren fulfill their future dreams, the Child Plan stands out to have the best features and most incredible benefits.