Can I transfer money from my RRSP to my daughter for the purchase of her home?

Jamie Golombek, vice-president of taxation and estate planning at AIM Trimark Investments, has the answer.

Jamie Golombek 22 February, 2003 | 2:00PM

Dear Expert:

We have an RRSP GIC invested at a major bank worth about $3,300. We want to transfer it to our daughter for her to use as a down payment on a house later this year. What are the tax implications, and what is the best way to go about it?

Expert Opinion:

Since your GIC investment is inside an RRSP, the only way you will be able to give that money to your daughter to use as a down payment on her home is by deregistering the RRSP and paying the tax on the amount withdrawn. If the value of the GIC is worth $3,300, (assuming no penalty to cash in the GIC prior to its maturity), then there will be a 10% withholding tax on the proceeds being withdrawn (in Quebec, the rate would be 25%). Additional tax may be owing when you file your 2003 income tax return, due in April 2004. The RRSP withdrawal is included in your income at full marginal tax rates; however, you will receive a credit for the 10% tax that the financial institution withheld upon the withdrawal.

While the federal Home Buyer's Plan allows Canadians to withdraw up to $20,000 tax-free from their RRSP to finance the purchase of a first home, it cannot be used to assist your daughter in acquiring her own home.

To find out how much an RRSP contribution may save you, try Morningstar's RRSP Calculator.

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Jamie Golombek

Jamie Golombek