TFSA for a Minor - Practical Implications

[RandomGeek]

Hi All.

Am considering starting a TFSA for my little one. Would like some information from those who have done so.

I would like to open it under the little one's ID number, and make monthly contributions.

However, lets say 5 years down the line I need some money for e.g. overseas school trip, and would need to withdraw a portion of the value.

1) Can I go ahead and authorise the withdrawal (remember, I'm not the account holder).
2) Must the little (well slightly bigger by this point ) one authorise the withdrawal (remember: still a minor at this point).

Can somebody with more info therefore help me out regarding the privileges I will have in a scenario like this? Obviously when the minor hits 18 things change, but what happens up to that point?

Thanks
RandomGeek

 

[supersunbird]

This will apply to you question, just replace education with whatever you want to use the money for.

http://mayaonmoney.co.za/2015/07/tax-free-savings-accounts-are-not-ideal-for-an-education-fund/

My idea, save outside of a TFSA for education and whatever, also the kid can go blow it all at age 18 if they want, because its not under their control.

 

[The_Ogre]

You will have all rights to the account until the child is no longer a minor.

Just remember, and this is fairly important, I've read that you will only be able to withdraw money from said TFSA account into the minor's bank account.

 

[Garson007]

Only do this if you're not going to touch the money, or think your minor is not going to be an idiot with it (i.e. withdraw it before (s)he is like 50).

 

[RandomGeek]

''This will apply to you question, just replace education with whatever you want to use the money for.

http://mayaonmoney.co.za/2015/07/tax...ducation-fund/

My idea, save outside of a TFSA for education and whatever, also the kid can go blow it all at age 18 if they want, because its not under their control.''

Thanks, no specifics at this point in time what we want to save for, but will most likely end up with a few places/products to stash money in, of which the TFSA will be one.

''You will have all rights to the account until the child is no longer a minor.

Just remember, and this is fairly important, I've read that you will only be able to withdraw money from said TFSA account into the minor's bank account.''

I have just checked out the Easy Equities thread as well, some interesting points there on the practicalities related to this topic.

''Only do this if you're not going to touch the money, or think your minor is not going to be an idiot with it (i.e. withdraw it before (s)he is like 50).''

Dude the little one is still in diapers, who knows how financial common sense will turn out...I will try my best to lead by example but you never know

 

[supersunbird]

Oh, another idea I had:

If you do save for the child in a TFSA, use YOUR TFSA for saving for their education and such. Their TFSA should be the last one touched.

 

[RandomGeek]

Oh, another idea I had:

If you do save for the child in a TFSA, use YOUR TFSA for saving for their education and such. Their TFSA should be the last one touched.

Agreed - the more the merrier!

 

[yeldoom]

Will a minor pay tax? How does using a TFSA benefit a minor versus other savings instruments?

Edit:
TFSA's have a lifetime cap of R500k. Deposits decrease the cap but withdrawals don't restore the cap. IOW, don't contribute if you might need to withdraw because you will be exhausting the little one's cap so you can go on holiday.

 

[RandomGeek]

Will a minor pay tax? How does using a TFSA benefit a minor versus other savings instruments?

Edit:
TFSA's have a lifetime cap of R500k. Deposits decrease the cap but withdrawals don't restore the cap. IOW, don't contribute if you might need to withdraw because you will be exhausting the little one's cap so you can go on holiday.

Looks like SARS will want tax paid, whether by yourself or by the minor if the money is outside a TFSA (e.g. unit trust)

http://www.sataxguide.co.za/taxability-of-the-income-of-minor-children/

"Income of Minor children
A taxpayer is liable for the payment of tax on any income which has been received by or accrued to or in favour of any minor children if such income arises from a donation, settlement, or other disposition by –
(i) the taxpayer; or
(ii) any other person, if the taxpayer made a donation, settlement or gave some consideration directly or indirectly in favour of the other person or his family.

A minor child will, however, be liable for tax on income which is received or accrues to him/her independently of him/herself; in his own right, for example, bona fide salary and investment income derived from his/her own funds i.e. from money inherited by him/her or received as a gift from any person other than the person mentioned in (i) and (ii) above or
from any other source. Should a minor child’s taxable income be sufficient to render him/her liable for tax, the taxpayer, as the legal guardian, must register him/her for income tax purposes and obtain and submit a return on his/her behalf.

All investment income received by or accrued to a taxpayer or his/her minor children must be declared (including investment income which has not been paid but has been utilised, accumulated or re-invested for the taxpayer or his/her minor children’s benefit). Where interest is claimed as a deduction against investment income received, full particulars (i.e.
amounts invested/borrowed, interest rates, date of each loan and investment) must retained for a period of five years after submission of the return."