What is an in-trust account in Canada?

An in-trust account is an informal trust where an adult holds investments "in trust for" a minor child. The adult manages the account, but the assets legally belong to the child. These accounts have no formal trust document.

Are in-trust accounts a good idea?

They have significant drawbacks: the child gains full control at age of majority (18/19), attribution rules may apply, and tax treatment is complex. Better alternatives include RESPs (for education) or formal trusts (for control).

What happens to an in-trust account when the child turns 18?

The assets legally belong to the child, who can demand full control at age 18 (or 19 in some provinces). You cannot legally prevent this. If maintaining control is important, a formal trust is necessary.

How are in-trust accounts taxed in Canada?

Attribution rules apply: interest and dividends are taxed in the contributor's hands until the child turns 18. Capital gains, however, are taxed in the child's name from the start. After the child turns 18, all income is taxed in their hands. This makes growth stocks (capital gains) more tax-efficient than GICs (interest) in an in-trust account.

Is an RESP better than an in-trust account?

For education savings, yes. RESPs provide a 20% government grant (up to $500/year via CESG), tax-sheltered growth, and withdrawals are taxed in the student's hands at a low rate. The main advantage of an in-trust account is flexibility — funds can be used for anything, not just education. Max the RESP first, then consider an in-trust account for additional savings.

In-Trust Accounts Canada 2026: Informal Trusts, Tax Rules & Better Alternatives

In-trust accounts (also called informal trusts) are one of the most misunderstood investment vehicles in Canada. Parents and grandparents open them thinking they’re saving for a child’s future with full control — but the reality is that the child legally owns the assets and can demand everything at age 18. The tax treatment is also complicated: interest and dividends are attributed back to the contributor (taxed at your rate), while only capital gains are taxed in the child’s hands. For most families, an RESP with its 20% government grant is a far better option.

What Is an In-Trust Account?

Feature	Details
Also called	Informal trust, ITF account
Structure	Adult trustee holds assets for minor beneficiary
Documentation	No formal trust deed
Legal ownership	Belongs to the child
Control	Adult manages until majority

How In-Trust Accounts Work

Setup

Step	Action
1	Open account at brokerage/bank
2	Register as “[Adult name] in trust for [Child name]”
3	Provide adult’s SIN and child’s SIN
4	Adult manages investments

Typical Uses

Use Case	Suitability
Saving for child’s future	Limited
Holding inheritance	Better options exist
Gift from grandparents	Consider RESP first
General savings	RESP often better

The Major Problem: Loss of Control

This is the issue that surprises most parents. Once you put money into an in-trust account, it legally belongs to the child. When they turn 18 (or 19 in some provinces), they can walk into the bank and withdraw everything — and there is nothing you can do about it. If you’ve saved $50,000 for their education and they decide to buy a car instead, that’s their legal right. If maintaining control over the funds matters to you, a formal trust ($1,500–5,000 in legal fees) with specific distribution terms is the only solution.

Age	Control
0-17	Adult trustee manages
18 (or 19)	Child has legal right to all assets
You cannot	Legally prevent access
No restrictions	Child can spend on anything

Example Scenario

Situation	Outcome
You save $50,000 for child’s education	—
Child turns 18	Full legal ownership
Child wants to buy a car	Can withdraw everything
Your recourse	None (legally their money)

Tax Treatment

Attribution Rules

Income Type	Who Pays Tax
Interest income	Parent/contributor
Dividend income	Parent/contributor
Capital gains	Child
Income on reinvested income	Child

Example

Year	Income	Who Pays Tax
Year 1: $1,000 dividend	$1,000	Parent
Year 2: $1,000 dividend + $40 on reinvested	$1,000 parent, $40 child
Capital gain on sale	Full amount	Child

After Age 18

Change	Details
Attribution ends	Income taxed to child
Capital gains	Still taxed to child
All new income	Child’s income

Comparing Savings Options for Children

Feature	In-Trust	RESP	Formal Trust
Government grants	No	Yes (20%+)	No
Tax-sheltered growth	No	Yes	Possible
Control after 18	Child	For education	Trustee
Attribution rules	Yes	N/A	Depends
Setup cost	Free	Free	$1,500+
Flexibility of use	Any purpose	Education	Per trust terms

Why RESP Is Usually Better

RESP Advantages

Advantage	Details
CESG grant	20% on first $2,500/year
Tax-sheltered	Growth not taxed until withdrawal
No attribution	Not your income
EAP taxed to student	Low/no tax
Control	Must be used for education

RESP vs In-Trust Example

Factor	RESP	In-Trust
Contribution	$50,000	$50,000
Government grants	$7,200	$0
Total invested	$57,200	$50,000
Tax on growth	None until withdrawal	Attributed + complex
Control	For education	Child at 18
If child doesn’t go to school	Options exist	Child keeps it all

When In-Trust Might Make Sense

Limited Situations

Scenario	Why In-Trust Could Work
RESP already maxed	Additional savings
Non-education purpose	Can’t use RESP
Capital gains income	Taxed to child anyway
Small amounts	Simplicity
Child is trustworthy	Comfortable with age 18 access

Capital Gains Strategy

Approach	Details
Invest in growth stocks	No dividends
Hold long-term	Defer gains
Child sells after 18	Their income, low/no tax

Formal Trust Alternative

When to Consider

Situation	Action
Large amounts (>$50,000)	Consider formal trust
Want control past 18	Formal trust required
Complex family situation	Get legal advice
Inheritance planning	Testamentary trust

Formal Trust Features

Feature	Details
Trust document	Lawyer-drafted
Control	Specifies terms, ages
Cost	$1,500-5,000+ setup
Annual tax return	T3 required
Income splitting	Age 18+ children

Tax Reporting

Who Reports What

Income Type	SIN to Use	Report On
Interest/Dividends (attributed)	Child’s SIN on T3/T5, report on parent’s return	Parent’s T1
Capital gains	Child’s SIN	Child’s T1
Second-generation income	Child’s SIN	Child’s T1

Record Keeping

Document	Why
Source of funds	Prove contributions
Cost base tracking	For capital gains
Income attribution records	Tax reporting
T3/T5 slips	Annual

Risks and Concerns

Legal Risks

Risk	Impact
Child demands money at 18	Must comply
Relationship changes	Child may use differently than intended
Child’s creditors	Can access the funds
Child’s divorce	May be divided

Tax Risks

Risk	Impact
Incorrect reporting	CRA reassessment
Missing attribution	Penalties
Complex calculations	Easy to get wrong

Converting Existing In-Trust Account

Options at Age of Majority

Option	Details
Transfer to child’s account	Simplest
Child keeps in-trust	Account continues
Can’t take back	Assets belong to child

If Child Doesn’t Want Money

Situation	Reality
Child wants parent to keep managing	Can do informally
Legal ownership	Still child’s
Can gift back	But gift tax doesn’t exist in Canada

The Bottom Line

For children’s education savings, an RESP is almost always better — 20% government grants, tax-sheltered growth, and the money must be used for education. In-trust accounts only make sense after the RESP is maxed, for non-education purposes, or when investing in growth stocks for capital gains (which are taxed in the child’s hands at a lower rate). If you need control past age 18, use a formal trust.