In Trust For (or ITF) accounts are non-registered plans that allow investors to save on behalf of a child. Many parents, grandparents, aunts and uncles use ITF accounts to complement their Registered Educations Savings Plans (RESPs).
! Planning Tip: Call us if you have questions about an account opened before October 1, 2017. Most of the content on this page applies to ITF accounts opened on or after October 1, 2017.
How do you open an ITF account?
Mail or fax us a completed application form. The ITF terms and conditions can be found on page 3 of the application.
What is an ITF account?
An ITF account is a non-registered account opened by an adult (someone who is the age of majority) in trust for someone who is not yet legally considered an adult (a minor). This typically happens when a parent or loved one opens an account in trust for a child.
The account holder is the trustee. The child is the irrevocable beneficiary – a beneficiary who cannot be removed once named to the account.
Any adult (or group of adults) living outside of Québec can open an ITF account for any child. The only requirement is that all trustees must be the age of majority in their province of residence. Trustees are not subject to any relationship restrictions between one another, or between themselves and the beneficiary.
! Planning Tip: Some restrictions apply to those who live outside of Canada. Call us for more details.
Any minor can be listed as a beneficiary. However, ITF accounts cannot have multiple or contingent beneficiaries. Simply put – one child per account – no matter how many trustees are registered as account holders.
! Planning Tip: There is nothing preventing a child from being named as the beneficiary on multiple accounts.
! Planning Tip: Beneficiaries who become non-residents may face certain restrictions once they reach age of majority. Call us for more information.
The minor child is the beneficial owner of the assets, while a trusted adult – the trustee – maintains legal authority over the account during the beneficiary’s childhood. Anyone who donates to the account irrevocably relinquishes ownership and entitlement of the deposited funds to the beneficiary.
The trustee’s job is to manage the account in the best interest of the beneficiary.
The beneficiary does not automatically replace the trustee as the account holder of record. As soon as the beneficiary is of age, they inherit the same authority over the account as the trustee. This authority is shared with the trustee allowing each to independently issue instructions on the account.
It is important to note that once a beneficiary reaches the age of majority, they alone are solely entitled to receive the proceeds of any withdrawals or transfers.
Once the beneficiary is of age, it is expected that the trustee will work with their advisor to have the account transferred directly to the beneficiary. This transfer is not taxable as ownership isn’t truly changing. The transfer simply allows the beneficiary to make their own investment decisions and assume sole authority over the account.
ITF accounts are not Formal Trust accounts. A Formal Trust requires the drafting of highly specialized legal documentation created by a lawyer. Anyone interested in opening a formal trust with Franklin Templeton should speak with their advisor.
The trustee is responsible for filing tax returns for capital gains and income earned in an ITF account. Tax slips will be issued with the trustee’s name and SIN, and will clearly indicate that the account is registered in trust for a beneficiary, whose name will also appear on the slip.
It is of critical importance that trustees work with advisors and tax specialists to fully understand the tax implications of holding an ITF account, and ensure filing is done accurately year after year.
! Planning Tip: Once a beneficiary is age of majority, the trustee should work with their advisor to transfer the account to the beneficiary. This will help to ensure proper attribution and administration of tax slips and avoid tax complications that may arise down the road.
All instructions require the authorization of the trustee.
We will continue to take instructions from the trustee, but redemption and transfer proceeds may only be payable directly to the beneficiary.
We will also take instructions directly from the beneficiary.
Note that any requests made independently by an adult beneficiary will result in the account being transferred into their name, to ensure appropriate tax and account activity reporting. To avoid delays, ensure we have complete beneficiary information on file. The transfer will be completed before the original request is processed.
All transaction requests can be mailed or faxed to our offices.
A set of Terms & Conditions that apply to ITF accounts domiciled outside of Québec is included in Franklin Templeton’s Combined Application Form.
These terms and conditions apply only to ITF accounts that were opened before October 1, 2017. Call us if you have questions about ITF accounts opened before that date.
The Terms & Conditions in Franklin Templeton’s Combined Application Form do not apply to accounts domiciled in Québec.
In order to open an account for a minor beneficiary in Québec, we require a Tutorship Agreement or similar document that outlines the details of the tutorship, how the account will be administered and by whom. Visit Curateur public Québec’s website to learn about tutorship to the property of a minor.
Québec residents interested in opening a Tutorship account with Franklin Templeton should speak with their advisor to initiate the process.
ITF accounts consist of various components, each of which is required to establish a trust.
Asset – This is the money within the account, held in trust for the beneficiary.
Beneficiary – This is the person for whom the account is opened in trust, sometimes referred to as the ‘in trust for.’ This person is the beneficial owner of the assets – they enjoy the benefit of owning the property even though it is registered in title to the trustee.
There can only be one beneficiary listed to an ITF account, and that beneficiary is irrevocable. They cannot be removed from the account once named.
Donor – This is any person who contributes to the account.
Joint Trustee – This is the term applied to each trustee when there is more than one trustee listed to an account.
Trustee – This is the person who effectively holds the account while the beneficiary is a minor. While they do not own the account, they hold signing authority over it. In this way, they are able to manage the assets in the best interest of the beneficiary.