Lifestyle | Can a 90-year-old mother transfer part of her TFSA to her two sons?

Two single brothers wonder if they could benefit before her death from part of the $159,000 that their 90-year-old mother holds in a TFSA, to benefit from the interest. But can their mother really live without it?

The situation

“We are a family essentially made up of my brother, my mother and me,” says Martin*.

He is 58 years old. His brother Jocelyn* is 55 years old.

“My brother works, he has two precarious jobs, but it suits him. For my part, I have been on disability leave for three years, and I live on $17,000 per year. »

Their mother will be 91 in the fall.

“We would like to know what is the best way for my mother to give during her lifetime without having too many tax implications,” explains Martin. She has approximately $68,000 in her RRIF [fonds enregistré de revenu de retraite] and $159,000 in his TFSA [compte d’épargne libre d’impôt]. She also has just over $10,000 in an unregistered account. »

Her mother, in good health, has lived for around twenty years in the same accommodation in a private seniors’ residence (RPA), for which she pays rent of $1,448, plus $243 for 15 meals per month.

“The pensions she receives cover her rent and small expenses,” says Martin.

“I always tell my mother that she doesn’t have to worry, and that if her lifestyle stays the same and her needs stay the same, she has enough money to live until the end of his days. »

“Although with old age and time, we can imagine that she will need more comfort and care,” he adds.

Since she doesn’t have immediate use for it, the two brothers wonder if a certain amount could not be transferred from their mother’s TFSA to their respective TFSAs.

“She is obviously aware that I am taking this step, and she is curious,” assures Martin.

Was an amount considered?

” No way ! he replies. In front of my mother and the person who takes care of her investments, I said: “Mom, you don’t touch the money in your TFSA and it’s useless. Ultimately, it could be in Jocelyn’s TFSA or mine, up to a certain amount. If you need it, we’ll take it out and give it to you. This money belongs to you, but it’s like we can hold it until you die.” »

They wouldn’t spend it that much, “but as long as they earn interest, it would perhaps be more interesting if his boys could benefit from it,” he argues.

There are no heirs other than the mother and her two sons in their respective wills, he specifies.

“My mother trusts us. It’s just a matter of seeing if there is any interest in doing it or not. »

“We need direction. »

The answer

Martin and his brother put into practice their excellent intention of seeking competent and informed advice before taking action.

This competent and informed opinion is given by tax specialist and financial planner Charles Hunter-Villeneuve, expert consultant at the Center of Expertise of Banque Nationale Gestion Privée 1859.

The case of the TFSA

Let’s first deal with the TFSA.

Could a certain amount be transferred from the mother’s TFSA to those of the two brothers?

“No,” our advisor answers unambiguously.

“First, it would be a withdrawal from the mother’s TFSA followed by a monetary gift to her sons and not a direct transfer. Secondly, Martin has $145,000 in TFSA, so I doubt that he has the necessary rights to be able to contribute the amount received from his mother into TFSA, unless he has really obtained good returns! ” Which is the case.

Martin and his brother will still be able to check how much their TFSA contribution room is by consulting My Account on the Government of Canada website.

But in any case, the strategy of withdrawing part of the mother’s TFSA to share it between her sons, on the condition that they pay her part of the money if she needs it, involves great risks.

Despite the good will expressed by the two sons, there is no guarantee that the sums will be available – or will still exist – when their mother requests them.

If she expressed the need in the year in which she withdrew the amounts from her TFSA, “she would have a surplus and hefty penalties could apply,” explains Charles Hunter-Villeneuve. Outside of the TFSA, the return would be taxable.

Even if the two brothers had all the necessary space in their TFSAs, “it would be preferable for their mother to keep her TFSA and make gifts to her sons whenever she sees fit depending on the evolution of her state of health,” advises the planner .

They will inherit the balance upon his death. “If there’s any left,” he adds.

But what donations?

The question of cost of living

Martin repeated to his mother that “if her lifestyle stays the same and her needs stay the same, she has enough money to last the rest of her life.”

This is the root of the problem. His mother, aged 91, is already showing signs of weakness, and there is a very high probability – Martin himself recognizes this – that she will soon require more extensive services.

However, Martin has only an imprecise idea of ​​his mother’s current lifestyle.

Charles Hunter-Villeneuve could have estimated it on the basis of his net annuity income, which corresponds approximately to his expenses, estimates his son. “I took the opposite approach, which was to calculate the maximum cost of living that she could afford until she was 97, based on the data provided,” says the planner.

Aged 91 at 1^er Next January, the lady will have to make a withdrawal of at least 13% of her RRIF in 2024, or approximately $8,450.

By adding his private and public annuities, our advisor estimates his indexed taxable income at $31,500 per year.

To this income can be added tax-free withdrawals from his TFSA of $159,000 and from his non-registered savings of $10,000.

By applying an after-fee return of 2.2% for zero-risk investments, he estimates that it can support indexed expenses of approximately $60,000 per year for up to 97 years, not including the GST credit and the credit for solidarity.

This is a budget of $5000 per month.

“Every month, she could donate money to her sons from the budget surplus, according to her needs,” imagines Charles Hunter-Villeneuve.

Let’s assume that his cost of living currently stands at $2,500 per month – a reasonable estimate, assuming gross income from annuities and RRIFs of $31,500 per year.

Each month, she could divide the remaining $2,500 between her sons. If she has to spend more for a month or two, she will transfer less to them. If she has to move to a residence that offers more services, she will be able to devote most of her monthly $5,000 to her own needs.

“It allows him to keep control over his money,” says Charles Hunter-Villeneuve.

An uncertainty

However, there remains an uncertainty, raises the planner: would this $5,000 be enough to pay for a possible stay in a specialized establishment?

In public or approved private CHSLDs, the contribution for a private room is capped at $2,080 per month. Added to this are small personal expenses. In non-approved private CHSLDs, however, the cost can vary between $5,000 and $8,000, according to the Bonjour Résidences website.

As a precaution, it would be more reasonable to reduce the monthly donation shareable between the sons to an amount that will make her comfortable.

And even more reasonable for their mother to calmly benefit from all of her savings until her accommodation conditions are definitively fixed.

* Although the case highlighted in this section is real, the first names used are fictitious.