The best way to transfer investments to your spouse
There are tax implications when transferring investments to your spouse. A straight transfer of a capital asset doesn’t mean the capital gains are also transferred, and the taxes on the capital gain or dividend would still be your responsibility. Depending on your goals for transferring investments, there are a number of ways to do it. For instance, if you want to avoid future taxes, consider loaning the funds to your spouse at the minimum prescribed interest rate, which is currently 2 percent If you have a large amount invested, you can even make the loan to a family trust that you run with many beneficiaries.
Key Takeaways:
- Transferring mutual funds or stocks can be done on an adjusted cost base and the current fair market value (FMV).
- Transfering into a spouse’s RRSP or TSFA ensures subsequent income, and withdrawals will not be taxed back to the giver, but it also means the giver will need to claim a capital gain at the time of transfer due to it being deemed a disposition.
- Using a spousal loan allows future income to be generated in the name of a spouse. The interest paid would be tax deductible by your spouse and taxable to the spouse loaning the money. There may still be deferred capital gains unless you sell it first to transfer the cash, or elect to claim it on your tax return at fair market value.
“A transfer of capital assets leads to attribution between spouses, such that any subsequent income – whether dividends, interest, capital gains, or other income – are taxable back to you.”