Insights & Resources

You set up an in-trust-for (ITF) account years ago—maybe to give your kid a head start on post-secondary costs, their first car, or simply to teach them about investing. You’ve been managing that money, carefully choosing stocks or funds, watching it grow. Then comes the big birthday: 18. Suddenly, that account isn’t yours anymore. It’s your child’s. But it’s not just a matter of changing a name on an online portal. Turning 18 triggers legal and tax changes that can catch families off guard—or worse, cost extra tax if you don’t plan the handoff.

Here’s the thing: with some foresight you can make this transition an opportunity, not a headache. In this article, we’ll break down how an ITF account works while your child is a minor, what changes once they reach the age of majority, and the smartest moves—TFSA, FHSA or RRSP—you can explore to shelter future growth from tax. Let’s dive in.

Understanding How ITF Accounts Work

Informal in-trust-for accounts are popular because they’re simple: a parent (or grandparent) opens a non-registered account in the child’s name, but retains control until the child reaches majority. From a paperwork standpoint, it beats setting up a formal trust. You buy the investments, the statements arrive in your mailbox, and you file any necessary tax slips.

But don’t let “informal” fool you. The Canada Revenue Agency (CRA) has clear rules on attribution and taxation:

• Interest & Dividends: Attributed back to the contributor (you) and taxed in your return until the child turns 18.
• Capital Gains & Losses: Always belong to the child, even before they’re 18.

So if your ITF portfolio holds dividend-paying stocks or bonds, the breakdown looks like this:

1. The child owns the capital gains portion (taxed on the child’s return).
2. The parent reports interest and dividends on their tax return (even though the funds sit in the child’s account).

Quick example: You put $20,000 into the ITF when your child is 10. Over eight years, it grows to $30,000—$5,000 in capital gains, $5,000 in dividends. That $5,000 of dividends must be reported on your personal tax return, potentially pushing you into a higher bracket. Meanwhile, the capital gains slip into your child’s return, often taxed lightly or not at all if they have no other income.

This arrangement works—until age 18. Then, attribution rules stop, and the account fully belongs to your child. Let’s see why that matters.

Key Changes on the 18th Birthday

In most provinces, turning 18 (or 19 in British Columbia and Nova Scotia) marks the legal age of majority. On that day, the ITF account officially becomes your child’s. You lose control; they can:

• Buy or sell investments at will.
• Withdraw all or part of the cash.
• Re-register assets into their own name or other plans.

That shift triggers new tax and planning considerations:

• Attribution Ends: From now on, any interest, dividends or reported gains show up on their tax return.
• Capital Gains Timing: If you sell holdings before their birthday, any gains land on your return. If you wait after, gains attach to theirs—often at a lower rate if they have minimal income.
• Registered Plan Eligibility: Upon turning 18, they open the door to TFSA contributions (most provinces), FHSA accounts, and can start building RRSP room based on their income.

Imagine this scenario: an ITF holds $50,000 in tech stocks that have doubled over five years. If you sell at $100,000 in November, you’re on the hook for $50,000 of capital gain. But if you wait until January—after junior’s 18th birthday—they report that gain. If they have part-time income of $10,000, they might pay only a few hundred dollars in tax versus thousands if you were the taxpayer.

So timing matters. That said, you don’t want to rush. Before you hit “sell,” consider the next moves: TFSA, FHSA or RRSP. Let’s walk through each.

Smart Next Steps: TFSA and the Timing of Contributions

TFSAs are a standout feature of Canadian tax planning. Contributions grow entirely tax-free and withdrawals don’t spark a tax bill. For an 18-year-old, that’s huge if they plan to invest and hold for decades.

Key points on TFSA strategy:

• Contribution Room: In most provinces, TFSA eligibility starts at 18. As of 2025, annual TFSA room is $7,000. If they turn 18 this year, they immediately get that full amount in 2025.
• In-Kind Transfers: You can move shares or ETFs directly from the ITF to their TFSA, but CRA treats that as a sale and then a contribution at fair-market value. That sale can trigger a capital gain—now reported on your child’s return.
• Cash Transfers: Sell within the ITF, pay any capital gains tax (in your child’s hands if after 18), then use the cash to top up the TFSA.

Case study: On Jan. 5, 2026, Sophia turns 18 and gains $7,000 of TFSA room. Her ITF account holds $40,000 in cash and investments. She decides to tuck $7,000 into her TFSA right away. Over the next three years, she does the same each January. By age 21, she has $21,000 in a tax-free wrapper, growing at 6% annually. Fifteen years later, she could look at well over $60,000, tax-free on withdrawal.

Here’s a simple comparison table you might show your child (visual idea in brackets):

[Figure: A two-column chart—one column for “Remaining in ITF” taxed at 20% on growth, one for “In TFSA” at 0% on growth—illustrating the gap over 10 years on a $20,000 initial investment.]

That graphic makes it clear. Even with modest returns, tax savings compound as powerfully as investment growth. It’s not just about sheltering today’s gains; it’s about decades of compounding without tax drag.

Beyond TFSAs: FHSA and RRSP Opportunities

While TFSAs cover general investing, you may have heard of two other registered plans that can be relevant once your child is of age:

1. First Home Savings Account (FHSA)

The FHSA blends RRSP-style deductions with TFSA-style tax-free withdrawals—provided the money is used to buy a first home within 15 years. Here’s how it works:

• Annual contribution limit of $8,000 (up to $40,000 lifetime).
• Contributions generate a tax deduction on the contributor’s return.
• Withdrawals to purchase a first home are tax-free.

Scenario: Alex turns 18 in 2025. He has $16,000 in his ITF account. He moves $8,000 to his FHSA, reducing his taxable income (if he has employment income) and earmarking those funds for his first home. The remaining $8,000 can go into a TFSA or stay in a non-registered account until next year’s FHSA room opens.

2. Registered Retirement Savings Plan (RRSP)

RRSPs are classic retirement vehicles. Contributions lower taxable income now, with tax on withdrawals deferred until retirement. For an 18-year-old:

• If they have earned income—summer jobs or part-time—they earn RRSP room equal to 18% of that income, up to the annual maximum.
• They can contribute early and carry forward unused deductions—to use when they’re earning more later.

Example: Jamie works part-time and earns $20,000 in 2025. She earns $3,600 of RRSP room (18% of $20,000). She could contribute that full amount, invest it, and defer claiming the deduction until she’s in a higher tax bracket—say, after graduation with a professional salary.

Each plan has its pros and cons:

• TFSA: No deduction, but growth and withdrawals are tax-free.
• FHSA: Deduction upfront, tax-free growth and withdrawal if used for a home.
• RRSP: Deduction upfront, tax-deferred growth, taxed on withdrawal (usually at retirement rates).

Which one to pick? It depends on goals. Saving for a first home? FHSA could be the priority. Saving for retirement with a low early-career income might mean building an RRSP and carrying forward deductions. And flexible, long-term growth often finds its home in a TFSA. The key is a conversation: your child’s life plans, earnings trajectory, and risk comfort.

Practical Steps for a Smooth Transition

Turning 18 isn’t just a number—it’s a planning milestone. Here’s a quick roadmap:

1. Review the ITF Holdings: Identify positions with large unrealized gains or upcoming dividends.
2. Decide When to Sell: If you need to crystallize gains, consider selling after their birthday so gains land on their return.
3. Map Out Registered Room: Check TFSA, FHSA and RRSP contribution limits based on their birth date and income.
4. Plan In-Kind vs Cash Transfer: Understand how an in-kind transfer triggers a deemed disposition and resulting capital gains.
5. Communicate Goals: Chat about home-buying plans, education costs, or early retirement dreams—align the strategy to real objectives.
6. Set Up Accounts in Advance: Open the TFSA and FHSA accounts just before their birthday so you’re ready to transfer on Day 1.

Quick side note: you don’t have to rush everything at midnight on their 18th birthday. A well-timed strategy in the months before and after gives you time to compare outcomes and choose the lowest tax route.

Final Thoughts and Next Steps

Let me explain one more time: an ITF account can be a fantastic way to help your child build wealth early. But once they turn 18, it’s more than handing over control. It’s an invitation to teach them about strategic planning—timing sales, understanding tax attribution, and exploring registered plans like TFSA, FHSA and RRSP.

Start the conversation well before that milestone birthday. Show them how to move money wisely, so they don’t end up with a big tax bill or cash parked in a low-yield account. With clear guidance and a solid plan, you’ll turn this milestone from “What do we do now?” into “Look at those tax savings—and that growth!”

We work with business professionals, executives, and families to grow and protect their wealth using our Wealth Plan formula. To discuss our approach and if it is the right fit for you, we invite you to schedule a no-obligation discovery consultation.