As with any life changing moment, having a new baby is very exciting, and while the imminent event is very focused on the now, it is also an opportunity to look forward into the child’s future and plan for other life events.
As either the grandparent or parent of your new family member, you will want to consider the following:
Saving for Your Child's/Grandchild’s Education
Many families start putting aside funds for their child’s education right away. There are several options for doing that, through banking / government programs, life insurance programs, tax free savings accounts, or through the creation of a trust.
One popular saving opportunity is a Registered Education Savings Plan (RESP). Not only does this help you save, but RESPs are linked to the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). The Federal government provides a 20% grant to your child’s RESP on contributions made into the account up to $2,500 each year. For example, if you contribute $2,500 to the RESP, the government will deposit $500 into the registered account.
If you have assets that you would like to set aside for your child’s education, you may want to consider the various opportunities, other than an RESP, that are available to you.
Trusts can be a valuable tool for funding your child’s or grandchild’s education as they reduce tax burdens and allow for stipulations regarding the use of the funds.
Tax free savings, corporate dividends, non-registered banking, and insurance, are some other options that could be considered.
It’s important to think ahead and set up a financial strategy that will provide the funding you will need for a child’s education, and give you peace of mind knowing it is looked after.
Create or Update Your Estate Plan
A new baby in the family is a big life event, which means that it is time to look at your estate plan. As a parent or grandparent, you will want to be sure that your plans for the future consider your new family member.
If you have not created an estate plan, the addition to your family presents an opportune moment to get started.
Or if you already have an estate plan in place, you should contact your estate planner to ensure that it is up-to-date with respect to the new baby.
MacMillan Estate Planning advisors will help you create a new estate plan, or modify an existing plan, through in-person meetings or virtually (from wherever you are located).
Canadian child tax benefits are available for parents with qualifying net family income.
If you live in a province with the Automated Benefits Application (ABA), you can opt to automatically apply for various child benefits when you register the birth of your new baby. If you choose to, you will be automatically applying for:
- Canada child benefit (CCB) - CCB is a payment made to eligible families to help with the cost of raising a child under the age of 18. The payment is made monthly and is tax-free. If applicable, the CCB may include the child disability benefit as well as any provincial or territorial program amounts.
- Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit - The GST/HST credit offsets GST/HST paid by families and individuals with low and modest incomes. It is also tax-free but is administered quarterly.
If you live in a province or territory that does not have the Automatic Benefits Application, or you chose not to take advantage of the application, you can apply for child and family benefits using your Canada Revenue Agency (CRA) My Account or by mailing Form RC66 to your tax centre.
Once you have registered for these benefits, you will have to file your taxes, on time, every year, to continue receiving the benefits.
In addition to these benefits, you may now be able to claim the Working Income Tax Benefit or, if you already receive the amount, it may increase. The Working Income Tax Benefit, which is paid quarterly, is a refundable tax credit that assists working low-income families and individuals.
Life changing moments such as having your first child, or adding to your family, is often a busy and exciting time. We can make sure your estate plan takes into account your new family member, including trust planning, education planning, tax planning and wills, so that you can focus on the new addition and not worry about the rest.
