In-Trust Accounts in Canada (2026): Informal Trust Rules, Tax and RESP Comparison

An in-trust account (also called an informal trust or ITF account) is a regular investment account opened by an adult “in trust for” a child. It is the simplest way to set money aside in a child’s name, but it has two features that surprise many parents and grandparents: the child legally owns the money and can take it at the age of majority, and the interest and dividends are usually taxed in the contributor’s hands, not the child’s. This page covers how these accounts work, how they are taxed, and how they compare with an RESP for education savings. It is part of our investing basics guides.

What an in-trust account is

Loss of control at the age of majority

Money put into an in-trust account is a gift to the child. When the child reaches the age of majority (18 or 19, depending on the province), they can ask for the assets and spend them on anything. The adult who funded the account has no legal way to stop this. If $50,000 was saved with university in mind and the child decides to buy a car, that is the child’s right.

The same ownership means the contributor cannot take the gift back. Keeping control past the age of majority requires a formal trust drafted by a lawyer, with written terms on when and how money is paid out. A formal trust has legal costs to set up and must generally file a T3 trust return each year.

How in-trust accounts are taxed

Canada’s attribution rules decide who pays tax on income from money given to a minor.

From the year the child turns 18, all income is taxed in the child’s name. Because capital gains are the child’s from the start, and a child with little other income often pays little or no tax, in-trust accounts are commonly invested for growth (for example, a low-distribution equity ETF) rather than in GICs or bond funds, whose interest would be taxed at the contributor’s rate.

Two cautions apply to the capital gains treatment. If the contributor is also the trustee and controls where the money goes, a separate attribution rule can make capital gains taxable to the contributor as well, which is why some families name a different adult as trustee. And if it is unclear that a real trust was created, the CRA can attribute all of the income, including capital gains, back to the contributor; a written record of the gift helps show the intent.

Tax reporting

Records worth keeping: where each contribution came from (to show whose money it was), the adjusted cost base of every holding, and each year’s T3 and T5 slips. One exception applies to Canada Child Benefit payments: the CRA says interest earned on CCB payments deposited into an account or trust in the child’s name is the child’s income, not the parent’s. The attribution rules guide covers the other exceptions.

In-trust account vs RESP

For money meant for post-secondary education, the main alternative is a Registered Education Savings Plan. The RESP guide covers the plan itself; this table compares the two accounts side by side.

Families who can contribute $2,500 a year to an RESP collect the full basic grant of $500. Missed grant room carries forward, but the basic grant is capped at $1,000 in any one year, so catching up takes time. Lower-income families can also receive the additional CESG and the Canada Learning Bond; see the RESP guide for the income thresholds.

If the child does not go to school

An RESP is not lost if the child skips post-secondary education: it can stay open in case they enrol later, move to a sibling, or be closed. When it is closed, contributions come back tax-free, the grants go back to the government, and the growth is taxed as income plus an additional 20% tax (12% for Quebec residents), unless up to $50,000 of it goes into the subscriber’s RRSP. The RESP guide explains each option. Money in an in-trust account belongs to the child regardless of their plans.

Student financial aid

Both accounts can matter when a student applies for need-based aid, because aid programs look at the student’s resources. An in-trust account is the child’s asset outright, while the grant-and-growth part of RESP withdrawals (educational assistance payments) is the student’s taxable income in the year it is paid. Rules differ by province and program, so the provincial student aid office is the place to confirm how each is treated.

When an in-trust account can make sense

A common order is the RESP first (to collect the grant), then an in-trust account for any additional savings. Some parents use their own TFSA instead, because the money stays theirs and growth is tax-free, at the cost of it not being in the child’s name.

Formal trust alternative

A formal trust is a separate taxpayer that generally files an annual T3 return. The family trust guide covers how they are set up and taxed.

At the age of majority

Related guides

• How much to invest each month if you are setting a savings target for a child as well as yourself
• Asset location: which account holds which investment across your own TFSA, RRSP and taxable accounts
• RESP guide and best RESP providers
• How to maximize the CESG
• Capital gains tax calculator