According to the CRA, you can deposit Canada Child Tax Benefit or Universal Child Care Benefit payments into a bank account or trust account in your child’s name and have the interest payments treated as your child’s income:
Generally, when you invest your money in your child’s name, you have to report the income from those investments. However, if you deposited Canada Child Tax Benefit or Universal Child Care Benefit payments into a bank account or trust in your child’s name, the interest earned on those payments is your child’s income.
If you already contribute the maximum allowed to the RESP and want to save more, it might make sense to deposit the CCTB and UCCB payments into a separate bank account and use the funds to invest in a diversified portfolio such as the Sleepy Mini portfolio. Another possibility is participating in a DRIP or SPP plan. As kids have little or no income, they are unlikely to pay any tax on investment income. Has anyone taken advantage of this tax break? I’d love to hear your comments.
Note: Thanks to Jordan for this tip.
[Update: I found this interesting thread on Red Flag Deals on the topic of investing the CCTB and UCCB payments in the child’s name]
