Canada is in the early stages of a historic intergenerational wealth transfer, with $1 trillion expected to be passed from baby boomers onto Gen X and Millennials by 2026.
While this transfer looms in the future, the more immediate and pressing reality of widespread financial support is already unfolding. Currently, 96% of Canadians with Millennial children provide them with financial support into adulthood, with nearly half (48%) still subsidizing children between the ages of 30 and 35.
This dynamic is not limited to parents alone — 59% of retirees report helping their non-student adult children with day-to-day expenses and major purchases and 54% of grandparents provide monthly financial support to their adult children, highlighting a broad societal reliance on older generations.
As this dependency continues to become more pervasive, so does financial strain. A recent survey speaks to this growing concern: while 57% of Canadian parents expect to financially support their children well into adulthood, an even greater majority — 61% — are not confident in their ongoing ability to do so. This precarious balance underscores the urgent need for sustainable strategies navigating this new reality.
A comprehensive review of strategies that parents and grandparents in Canada can use to develop sound, intentional and communicative intergenerational financial plans has eight components.
1. RESPs
RESP contributions grow tax-free and attract government grants, like the Canada Education Savings Grant. Withdrawals from RESPs are categorized into two types: contribution refunds are tax-free since they were made with after-tax dollars; and education assistance payments (EAPs), which include government grants and investment income, taxable in the hands of the student.
Since most students have little to no income, the tax impact is minimal, making EAPs a highly efficient way to fund education. RESPs can remain open for up to 35 years, allowing beneficiaries to pursue education later in life. If the original beneficiary doesn’t attend post-secondary education, the funds can be transferred to another beneficiary, rolled into an RRSP — up to $50,000, if conditions are met — or withdrawn with tax implications.
2. First Home Savings Account (FHSA)
The FHSA is a registered account introduced to help first-time homebuyers save for a qualifying home purchase. Contributions of up to $8,000 per year — to a $40,000 lifetime maximum — are tax-deductible. Withdrawals, including investment growth, are tax-free when used towards a qualifying home purchase.
Where both partners in a couple qualify, each may open an FHSA, doubling the tax-advantaged savings available. Parents cannot directly contribute to the account, but gifts are permitted.
Furthermore, unused FHSA funds can be transferred into an RRSP without affecting RRSP contribution room, provided the account is closed within 15 years of opening or by the end of the year the holder turns 71.
3. TFSA
TFSAs function as a flexible, tax-sheltered investment vehicle available to Canadians aged 18 and older. Contributions are not tax-deductible, but investment income and withdrawals are entirely tax-free.
Parents can help their adult children jump-start their TFSA savings by gifting funds to fully utilize the child’s available TFSA contribution room — effectively turning parental cash into a growing, tax-exempt investment portfolio in the child’s name.
4. Inter-vivos family trusts
Inter-vivos family trusts are a common way for parents and grandparents to help provide financial support to family beneficiaries. While technical and requiring expert trust and tax law advice as an integral part of any trust establishment process, these trusts can be revocable, allowing changes as family needs evolve; irrevocable, offering stronger protection and tax benefits; or a hybrid of the two, balancing control and protection.
When appropriately structured, inter-vivos trusts can continue operating after the grantor’s death for up to 21 years, ensuring ongoing support for beneficiaries over time. Assets can be managed by trustees and distributed gradually and methodically to beneficiaries according to the terms of the underlying trust(s), subject to all relevant provisions of the Income Tax Act pertaining to trusts.
Subject to the relevant attribution rules under the Income Tax Act, trustees can be instructed to provide regular allowances for living expenses, cover specific costs such as rent or education and impose conditions (e.g., age) to encourage financial responsibility.
Moreover, the use of multiple trusts can be useful for protecting assets from creditors or ensuring responsible use by children, as assets held in irrevocable inter-vivos trusts are legally separated from the grantor’s estate and personal ownership. This is particularly valuable for those with wealth, involved in higher-risk fields or businesses or families with complex financial dynamics.
The use of family trusts can also help to bypass probate and reduce estate administration costs.
Trusts can be strategically used to minimize certain non-Canadian estate taxes — such as U.S. estate tax — by removing assets from the taxable estate when properly structured. In Canada, trusts can also be tailored to provide for disabled or special needs beneficiaries without affecting government benefits, offer long-term care funding and ensure financial stability for vulnerable family members.
The use of alter ego trusts can be a useful and highly specialized estate planning tool that is available to Canadians aged 65 or older. An alter ego trust, which requires expert trust and tax advice, is a form of living trust for seniors (the settlor) to transfer assets into a trust while retaining exclusive control and benefit during their lifetime.
Unlike traditional inter-vivos trusts, alter ego trusts are designed to simplify estate administration. The settlor must be the sole beneficiary during their lifetime, and they typically act as the trustee.
Upon death, the trust assets pass directly to the named residual beneficiaries — often children or grandchildren — in accordance with the trust terms, bypassing probate and avoiding estate settlement delays and costs.
One key advantage is that transfers into an alter ego trust do not trigger immediate capital gains, provided the trust meets statutory requirements. Instead, the trust is deemed to dispose of its assets upon the settlor’s death, allowing for tax deferral and efficient planning.
While not used for lifetime gifting, alter ego trusts offer a structured and tax-efficient way to pass assets to the next generation, minimizing administrative burdens and preserving family harmony.
For families with operating businesses or significant private assets, advanced planning tools like the lifetime capital gains exemption (LCGE) and Section 85 Income Tax Act rollovers can be instrumental.
Subject to the rigours of the Income Tax Act and the need for expert trust and tax lawyers to be involved, the LCGE, in appropriate cases, allows parents to transfer qualifying business shares to children with up to $1.25 million in capital gains sheltered from tax per person. Section 85 rollovers enable tax-deferred transfers of assets into corporations. These strategies can help structure ownership transitions and preserve family wealth across generations.
5. Joint ownership of real estate
Helping family members purchase their first home is a long-established practice within Canada. Traditionally, this support involved simple cash gifts to help defray the acquisition costs or the act of co-signing on a mortgage.
Today, this has morphed into helping to service the underlying mortgage debt on a go-forward basis. Great care is required, especially as the cost of housing in Canada has risen tremendously.
While subject to the rigours of the Income Tax Act and the need for expert estate, tax and real estate lawyers to be involved, there has been a rise in the use of joint ownership and mortgage structuring strategies. These strategies can provide housing stability while preserving a degree of parental control.
6. Insurance and annuity planning
Parents can fund life, disability or critical illness insurance for children or grandchildren. While annuities are often overlooked in family financial planning, by purchasing an annuity, families can create a guaranteed stream of income that begins at a chosen age and continues for a set period — or even a lifetime.
This approach is especially valuable when the goal is to promote financial discipline by avoiding lump-sum gifts. Annuities also ensure stability for beneficiaries with limited financial experience and mitigate the risks associated with market volatility and economic uncertainty.
Annuities can be customized to suit individual needs, including inflation protection, deferred start dates and return-of-premium options. They also offer tax-deferred growth and can bypass probate when beneficiaries are named.
For Canadian families supporting dependents with special needs or financial vulnerabilities, various insurance and annuity products can and do often serve as a reliable income source that complements other planning tools.
7. Structured loans and gifting
Subject to the prescribed rate of interest rules applicable under the Income Tax Act, low-interest loans with formal agreements can help children manage costs while maintaining accountability. Gifting while living allows parents to see the impact of their support and may also reduce estate complexity.
The use of hotchpot clauses by wills and estate lawyers in wills (a type of provision that aims to ensure fair and equitable distribution of an estate among beneficiaries by accounting for lifetime gifts or loans made by the testator) can ensure fairness among siblings.
8. Financial literacy and succession planning
Open conversations about money, budgeting and long-term planning are essential, particularly in the case of family enterprises. Parents can encourage children to set up and use various investment tools, like RESPs, TFSAs, RRSPs and FHSAs — all federal programs aimed at helping Canadians to build independence.
Empowering younger generations is key to sustaining wealth. Financial literacy initiatives that cover budgeting, investing and responsibility, along with mentorship and role modelling and encouraging education, entrepreneurship and career development are all ways to empower younger generations to sustain wealth.
Simply put, fiscal prudence should play a key role in any intergenerational wealth planning strategy.
Not just a financial exercise
In today’s economic climate, Canadian families are facing unprecedented challenges, from rising living costs to delayed financial independence among younger generations. In response, many parents and grandparents are shifting from reactive generosity to strategic legacy-building — a powerful evolution that requires navigating complex financial and emotional landscapes to preserve both family wealth and well-being.
As Canadian families navigate this unprecedented wealth shift and innate desire to financially support family members, professional advisors can and do play pivotal roles in guiding intergenerational financial planning. By leveraging tax-efficient tools, fostering open communication and promoting financial literacy, advisors can help families build resilient, equitable legacies that extend beyond wealth — preserving values, relationships and long-term security.
Advisors must be aware at all times though that financial planning decisions — particularly those involving tax, estate and trust matters — are highly fact-specific and complex. As such, clients should be strongly encouraged to consult with qualified professionals, such as financial planners, expert tax advisors and wills and estate lawyers, to ensure strategies are tailored to their specific circumstances and comply with applicable laws and regulations.
Marc Mercier is a partner at Cassels Brock & Blackwell LLP and co-chair of its Private Client Group. As a designated Family Enterprise Advisor, Marc brings specialized expertise in advising business families on succession, governance and legacy planning. Marc wishes to acknowledge the contributions of Manbir Grewal, an articling student at Cassels, in helping with the drafting of this article.
This article has been updated.