Boomers are giving kids money before they die in ‘dysfunctional’ system
The Great Wealth Transfer is set to pass on a stunning $1 trillion from baby boomers to their heirs in the next few years, but some older Canadians are getting a head start on moving their money before they die.
Jamie Golombek, managing director in tax and estate planning at Canadian Imperial Bank of Commerce (CIBC) Private Wealth, said these pre-transfers of wealth have become particularly common when it comes to baby boomers helping their adult children buy their first home.
“It has become almost unaffordable, completely unaffordable, depending on the market, certainly in Toronto and Vancouver, but even some of the other … major cities, where most of our clients are,” Golombek said.
“Ultimately, it’s just impossible for the average person to be able to get even the down payment together to buy a first home without significant aid from parents. So, yes, we’re seeing this literally every day.”
A June report from CIBC said the share of first-time homebuyers who received financial help from family members has climbed to 31 per cent, up from 20 per cent in 2015. The average gift stands at about $115,000.
“The bottom line is that the parents have done a financial plan; they feel they’re in good shape and they just have excess cash that they really don’t need,” Golombek said.
He added that in many cases these parents are paying taxes at a higher rate due to their wealth, so transferring some funds over to their adult children can be a smart financial move, especially if they plan for their children to inherit these funds anyway.
And since Canada doesn’t have a gift tax, parents don’t have to report a cash gift to their children on their tax return, although withdrawals taken from a registered retirement savings plan (RRSP) or
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