Can investment units be transferred to a spouse or children/grandchildren?
Investment units can be transferred to a spouse to facilitate income splitting. Many investors purchase the investment to provide tax relief for a high earning spouse for the first four years, and then when the major writeoffs are exhausted, transfer the unit to the lower income spouse, who then takes the partnership income at a lower tax rate. Transferring investments to children or grandchildren will incur liability for capital gains tax on 50% of the fair market value of the investment less adjusted cost base (ACB). This is best done when fair market value and ACB are nearest in value, once the tax writeoffs have been taken, to minimize tax exposure. A good mechanism for passing on investment units to family members is through a trust. The units are transferred into the trust when capital gains tax liability is lowest. The investor can continue to benefit from the income from the investment by taking income from the trust, or pass the income onto other beneficiaries as desired. As l
