Investing for Your Kids with XEQT: In-Trust Accounts Explained for Canadian Parents

The day my niece was born, my sister asked everyone for suggestions on what to get her. The grandparents bought adorable outfits she would outgrow in two months. Friends brought toys she would not remember. I opened a brokerage account, bought $500 of XEQT, and labelled it “In Trust For Olivia.”

My sister thought I was being weird. “She is a baby. She does not need stocks.”

Three years later, that $500 has grown into over $650. Olivia still has no idea it exists. She will not know about it for another fifteen years. But by the time she turns eighteen, if I keep adding to it and the market does what the market has historically done, she could be starting adulthood with a meaningful financial head start – not because I am wealthy, but because I understood compound growth and started early.

This post is about how to do exactly that for your own kids, nieces, nephews, or grandchildren using an informal in-trust account and XEQT. It is one of the most powerful and underutilized tools available to Canadian parents, and almost nobody talks about it.

1. What Is an Informal In-Trust Account?

An informal in-trust account (sometimes written as “ITF” – in trust for) is a regular investment account that an adult opens and manages on behalf of a minor child. It is not a registered account like a TFSA, RRSP, or RESP. It is a standard non-registered investment account with a special designation that the assets are being held for the benefit of a named child.

The key characteristics:

• The adult (trustee) controls the account and makes all investment decisions
• The child (beneficiary) is the legal owner of the assets
• There is no government registration – it is an informal arrangement, not a formal legal trust
• No contribution limits – you can invest as much as you want
• No restrictions on how the money is used once the child reaches the age of majority (18 or 19 depending on the province)
• Available at most Canadian brokerages including Wealthsimple

Think of it as a holding pen. You put money in, invest it on behalf of the child, and when they become a legal adult, the account and everything in it belongs to them.

2. RESP vs In-Trust Account: How They Compare

Most Canadian parents know about RESPs (Registered Education Savings Plans), and for good reason – the government grants are essentially free money. But RESPs have limitations that in-trust accounts do not. Here is how they stack up:

The bottom line on RESP vs in-trust: they are not competitors. They are teammates. You should absolutely max out the RESP first to capture the free government grants. The in-trust account is for everything beyond that, or for situations where the RESP does not make sense (like if you are unsure the child will pursue post-secondary education).

I cover RESP strategies in detail in my RESP investing guide, so I will not repeat all of that here. For this post, let us focus on the in-trust account.

3. The Tax Rules: Attribution Explained in Plain Language

Here is where in-trust accounts get a little tricky, and where most guides lose people. The CRA has “attribution rules” that determine how investment income in an in-trust account is taxed. Let me break it down as simply as possible.

When you (the parent or contributor) put money into an in-trust account for your child, the income earned on that money is taxed as follows:

• Interest income: Attributed back to YOU (the parent). You pay tax on it at your marginal rate.
• Dividend income: Attributed back to YOU. You pay tax on it.
• Capital gains: Taxed in the CHILD’s hands. The child pays tax (or more likely, pays zero tax because they have little to no income).

Read that last point again. Capital gains are not attributed back to the parent. They belong to the child for tax purposes.

This is why XEQT is such an ideal investment for in-trust accounts:

• XEQT generates most of its returns through capital gains (stock price appreciation), which are taxed in the child’s hands – effectively at 0% if the child has no other income
• XEQT pays relatively modest distributions (a mix of dividends and some interest), which are attributed back to the parent
• Over the long term, the vast majority of XEQT’s total return comes from growth, not distributions

Compare that to a GIC or bond fund, where almost all the return comes as interest income – all of which gets attributed back to you. Or a high-dividend stock, where the dividends get attributed back to you. XEQT’s growth-heavy return profile is tailor-made for the in-trust account structure.

One more important rule: If the child earns income on the original contributed amount, that income follows the attribution rules above. But if the child earns income on the growth (second-generation income), that income is taxed in the child’s hands regardless of whether it is interest, dividends, or capital gains. Over time, as the growth compounds and dwarfs the original contributions, more and more of the income naturally shifts to the child’s hands anyway.

4. How Much Could XEQT Grow for Your Child?

Let us look at some real numbers. Assuming an 8% average annual return for XEQT (which is consistent with long-term global equity returns), here is what different contribution amounts could grow to by the time your child turns 18:

Look at the $100/month column. That is $100 a month – less than most people spend on streaming subscriptions and takeout coffee combined. After 18 years, your child starts adulthood with nearly $49,000. And thanks to the attribution rules, the capital gains portion of that growth (which is most of it) was taxed at the child’s rate – likely zero.

Even $50 per month turns into over $24,000. That is a first and last month’s rent on an apartment, or a significant dent in university costs, or the seed money for the child’s own TFSA once they turn 18.

5. How to Open an In-Trust Account

Opening an in-trust account at most Canadian brokerages is straightforward. Here is the general process:

1. Open a non-registered investment account in your name with an “in trust for” designation for the child
2. Provide the child’s information – full legal name, date of birth, and Social Insurance Number (SIN)
3. Fund the account with an initial deposit or set up recurring contributions
4. Buy XEQT (or whatever you plan to invest in)
5. Set up automatic contributions if your brokerage supports it

At Wealthsimple, the process is particularly simple. You can open an in-trust account directly in the app and set up recurring purchases of XEQT with zero trading commissions. The whole setup takes less than ten minutes.

A few important notes:

• The money is irrevocable. Once you deposit money into an in-trust account, it legally belongs to the child. You cannot take it back.
• You need the child’s SIN. You can get this from Service Canada. You will need it for tax reporting purposes.
• Keep records of contributions. Track how much you contribute and when, because you will need this information for calculating the adjusted cost base and for tax attribution purposes.

6. What Happens When Your Child Turns 18 (or 19)?

This is the question every parent asks, and it is a legitimate concern: when the child reaches the age of majority in your province (18 in Alberta, Manitoba, Ontario, PEI, Quebec, and Saskatchewan; 19 in all other provinces), the in-trust account legally belongs to them. You must transfer control of the assets to the child.

At that point, the child has several options:

• Keep the investments as-is and let XEQT keep growing
• Transfer the holdings to their own TFSA (they will have at least one year of TFSA contribution room by then, and can transfer in kind – though this counts as a disposition for tax purposes)
• Sell some or all of the investments to fund education, a car, travel, or anything else
• Move the account to a different brokerage if they prefer

The big concern I hear from parents: “What if my kid blows it all?”

This is a real risk, and I will not sugarcoat it. At 18 or 19, the money is legally theirs. You cannot prevent them from spending it. But here is what I have found: kids who grow up knowing they have an investment account, who are taught about compound growth and how money works, are far less likely to cash it all out impulsively.

This is actually one of the best features of the in-trust account – it is a teaching tool. Starting around age 12 or 13, you can show your child the account. Let them see how much it has grown. Explain what XEQT is. Walk them through the concept of owning tiny pieces of thousands of companies around the world. By the time they are 18, they are not just inheriting money – they are inheriting a financial education.

Some strategies to protect against impulsive spending:

• Start the conversation early. Do not surprise them with $50,000 on their 18th birthday with no context.
• Make it a gradual reveal. Show them the account at 13, explain the basics at 14, discuss the growth at 15, talk about their options at 16 and 17.
• Model the behavior. If they see you investing in XEQT yourself and talking about it positively, they are more likely to follow suit.
• Suggest (do not mandate) a plan. “What if you kept 80% invested and used 20% for something fun?” is more effective than “You are not allowed to touch it.”

7. The Power of Birthday and Holiday Money

Here is a practical tip that has worked beautifully in my family: instead of (or in addition to) buying toys and gifts, ask relatives to contribute cash to the child’s XEQT in-trust account.

Grandparents are especially receptive to this. They love the idea of giving a gift that grows, and many of them are relieved to not have to figure out what a seven-year-old actually wants. A $100 birthday cheque invested in XEQT at birth is worth approximately $400 by the time the child turns 18 at 8% annual returns. That is a birthday gift that literally quadruples.

Here is what annual $200 gifts (birthday + holidays) invested in XEQT at 8% look like:

Nearly $10,000 from birthday and holiday money alone. And that is with just $200 per year. If grandparents, aunts, and uncles all chip in, the numbers climb quickly.

8. Combining RESP and In-Trust: The Optimal Strategy

For parents who want to give their children the absolute best financial start, here is the approach I recommend:

Step 1: Max out the RESP first. Contribute $2,500 per year to capture the full $500 annual CESG (Canada Education Savings Grant). This is literally free money – a guaranteed 20% return on your first $2,500 each year. Do this before anything else.

Step 2: Invest the RESP in XEQT (or an age-appropriate asset allocation if the child is close to needing the funds).

Step 3: Open an in-trust account for additional savings. Anything beyond the RESP contribution limit, or money that you want the child to have for non-education purposes, goes here.

Step 4: Invest the in-trust account in XEQT. The growth-oriented nature of XEQT minimizes the tax impact from attribution rules.

Step 5: Set up automatic contributions to both accounts. Even $50/month to each account adds up dramatically over 18 years.

This combined approach gives your child:

• Free government grants (from the RESP)
• Tax-sheltered growth (from the RESP)
• Flexible, non-education-restricted savings (from the in-trust account)
• A financial education (from watching both accounts grow)

9. Common Questions About In-Trust Accounts

Can I open an in-trust account for a child who is not mine (niece, nephew, grandchild)? Yes. Anyone can open an in-trust account for any minor child. You do not have to be the parent. Grandparents, aunts, uncles, and family friends can all do this. You will need the child’s SIN and the parent’s permission.

Can I contribute to both an RESP and an in-trust account for the same child? Absolutely. They are completely separate. There is no interaction between the two.

What happens if I want to close the in-trust account before the child turns 18? This is complicated. The money legally belongs to the child, so you cannot simply take it back. You may be able to collapse the account and use the funds for the child’s benefit (education, activities, etc.), but consult a tax professional before doing this.

Do I need to file a separate tax return for the child? Generally no, unless the child has enough income to owe tax (unlikely for most children). But you do need to report the attributed income (interest and dividends) on your own tax return. Capital gains get reported on the child’s return, but if they have no other income, they likely owe nothing.

Is XEQT really the best choice for an in-trust account? For most situations, yes. XEQT offers global diversification, low fees, and a return profile that is heavily weighted toward capital gains – which is exactly what you want given the attribution rules. The only scenario where I might choose differently is if the child will need the money in less than five years, in which case a more conservative option might be appropriate.

Can the child contribute their own money to the in-trust account? Yes, and income on the child’s own contributions is always taxed in the child’s hands (no attribution). If your teenager has a part-time job and adds their own money, that growth is entirely theirs for tax purposes.

10. Teaching Your Kids About Investing Through the Account

I want to end with what I think is actually the most important benefit of the in-trust account – and it has nothing to do with money.

When you invest for your child in XEQT and show them the account as they grow up, you are teaching them lessons that most adults never learn:

• Patience pays off. They get to see, year after year, how their money grows without anyone doing anything.
• The market goes up and down, and that is okay. When they see a red month and you calmly explain that this is normal, you are building investing resilience.
• Small amounts add up. They watch $50 birthday gifts compound into real money over years.
• Investing is not gambling. When they understand that XEQT owns pieces of thousands of real businesses around the world, they develop a healthy relationship with the stock market.
• Starting early is the biggest advantage. They live this truth firsthand.

My niece Olivia is only three, but in about ten years, I am going to sit down with her and show her that account I opened on the day she was born. I am going to show her the first $500 purchase, the birthday additions, the ups and downs, and the long upward trend. And I am going to explain that this is what it looks like when money works for you instead of you working for money.

That lesson will be worth more than whatever dollar amount is in the account.

The Bottom Line

An informal in-trust account is one of the most powerful and underutilized tools available to Canadian parents and family members who want to give a child a financial head start. Combined with XEQT – which offers global diversification, low fees, and a tax-efficient return profile for in-trust accounts – it is a simple, effective way to build meaningful wealth for the next generation.

Max out the RESP first for the free government grants. Then open an in-trust account for everything beyond that. Invest in XEQT. Set up automatic contributions. And most importantly, use the account as a teaching tool to give your child something even more valuable than money: financial literacy.

Eighteen years is a long time. Five or six doublings worth of time, if we are applying the Rule of 72. The sooner you start, the more those doublings work in your child’s favor. And the best part? You do not have to be rich to do this. You just have to start.