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Financial gifts that keep on giving

Gail Johnson

Adrian Spitters admits he’s a last-minute shopper. And the gifts he does purchase his kids inevitably return. So the Abbotsford, BC-based certified financial planner was thrilled to hear that one of his children, who’s 20, put money on her wish list this year for the first time.

“You cannot go wrong giving money, because at least you’re giving something that they’ll appreciate and use now or in the future,” says Spitters, who’s a senior planner at Assante Capital Management. “Because we’re usually rushed to buy Christmas gifts -- especially men -- we wind up … giving something that will be exchanged after Christmas or not really appreciated ... and therefore a waste of money.”

So while a new pair of earrings might lose their lustre, financial gifts keep on giving.  Here are a few to consider:

This is guaranteed to please. It can be tagged for a specific purpose — to put toward a student loan or a long-planned vacation or a new car — or not.

RESP contribution
We all know the cost of post-secondary education is only going to go up. If there’s a child in your life you care about (and her parents, who will be lucky to be able to afford to send their kids to college or university) but you’re not the primary caregiver, you can still put money in a Registered Education Savings Plan for her.

For starters, check with her parents or guardians to make sure the maximum contribution limit of $50,000 hasn’t been reached and to see if one or more plans have already been set up.

If you’d like to set up your own plan rather than just hand over cash to the parents, there are two options. If you’re a blood relative, you can open an RESP Family Plan. According to the Income Tax Act, only parents, grandparents, or siblings are classified as blood relatives. If you’re not a blood relative, you can start an RESP Individual Plan.

Informal In-Trust-For (ITF) account
This is a great alternative to RESPs, according to Spitters, especially if a child doesn’t end up going to a qualified college or university or to post-secondary school at all. (There are some restrictions in getting your money out of RESPs.)

“The ITF is a much simpler plan,” Spitters says. “You, the parent, sets up an investment account in your name In-Trust-For your child. All investment growth is taxed in your child’s name, and because they have no income in their early years, no tax is owed by the child. Because the money is held in trust for the child no income is attributed to the parent.

“At age of majority, you can arrange to have the child transfer the ITF funds into a TFSA, up to the annual limit. The amount over this limit can be invested into a capital class or corporate-class share structured mutual fund to defer taxes on the invested money and then transferred over into their TFSA each year … until all the funds have been transferred into the TFSA.

To make the gift even more valuable, get your child involved in the investment process, Spitter recommends. “This is a great way to educate your child and establish a habit of investing and managing money early on in their life.

Charitable donations in person’s name
More and more Canadians are turning to charitable giving rather than wrapping up a gift.

According to BMO Harris Private Banking, 62 per cent of Canadians would opt for a donation made on their behalf rather than receiving a traditional present. And 78 per cent like the idea of making a charitable donation on someone else’s behalf instead of giving a wrapped gift.

With so many worthy causes, consider the recipient’s personal interests. The GMO Financial Group suggests givers do their due diligence when choosing an organization in order to avoid fraudulent charities. (You can ask a charity for its registration number and check it with the Canada Revenue Agency.) And remember to get a tax receipt.

An appointment with a financial advisor
Set up an initial meeting for someone you love with a financial advisor (and cover the cost if there is one). Establishing a long-term investment plan really is a gift that keeps on giving, assuming the markets cooperate.