Gifting Bitcoin in Canada: A Practical Guide to Safe Transfers, Taxes, and Estate Planning

Giving Bitcoin as a gift is increasingly common in Canada, whether it is a birthday present, a way to help a family member start saving, or a legacy you want to pass on. The process combines technical steps, legal and tax considerations, and personal security decisions. This guide walks Canadian givers and recipients through how to transfer Bitcoin safely, record the transaction for tax and estate purposes, and build durable inheritance plans while avoiding common pitfalls.

Why gifting Bitcoin needs special care

Bitcoin is not like gifting cash or a physical asset. Transferring Bitcoin is an on-chain disposition that may trigger tax events for the donor, and the recipient becomes responsible for custody and security. Additionally, operational mistakes or poor backups can permanently lose funds. Canadians must balance ease of transfer with strong self-custody practices and clear documentation to protect both parties.

Key legal and tax basics in Canada

The Canada Revenue Agency treats cryptocurrency as a commodity. That means a gift is often a disposition by the donor and can create a capital gain or loss. Here is a simplified example to illustrate:

• You originally bought 1 BTC for CAD 10,000.
• You gift that 1 BTC when it is worth CAD 50,000.
• The deemed capital gain is CAD 40,000. Canada currently includes 50% of capital gains in taxable income, so CAD 20,000 would be taxable income for the donor in the year of the gift.

Always confirm tax treatment with a professional accountant or tax lawyer. Gifts between family members may have additional considerations. If you use an exchange to sell or move funds, FINTRAC and KYC rules apply, and exchanges such as Bitbuy or Coinsquare may require documentation for large transfers.

Decide the custody model before gifting

Choose whether the recipient will hold the Bitcoin directly, or whether you will create a custodial arrangement. Common models:

• Immediate self-custody: Donor sends Bitcoin to recipient-controlled wallet. Best for adult recipients who can manage keys.
• Assisted transfer: Donor helps set up a hardware wallet for the recipient then seeds it with the gifted amount. Good for beginners.
• Escrowed transfer: Use a trusted third party or multisig with the donor and recipient as co-signers for a transition period.
• Legacy/trust: Use legal trusts or wills to transfer Bitcoin on death or incapacity. These arrangements should involve lawyers and clear custody instructions.

Practical, step-by-step gifting workflow

1. Plan and document the gift

Record the intent in writing: who is the donor, who is the recipient, number of BTC or fractions, date, and any conditions. Documentation helps for tax reporting and estate planning. If funds are being moved via an exchange, keep trade and withdrawal records and receipts for the CRA.

2. Choose the recipient wallet and confirm control

If the recipient already has a self-custody wallet, ask them to provide a receiving address and confirm it in person or over a secure channel. If they do not have a wallet, consider these recommended options:

• Set up a hardware wallet for them (store the seed on metal backup and a safe location).
• Create a watch-only wallet for the recipient to verify and monitor receipts without exposing private keys.
• Consider multisig for high-value gifts where both the donor and recipient (or a trusted third party) co-sign transactions for a transition period.

3. Test with a small transfer

Always send a small test amount (for example, 0.001 BTC) to the recipient address and have them confirm receipt. This verifies the address and the recipient's ability to control or access the wallet.

4. Make the main transfer securely

Once the test succeeds, transfer the full amount. Use a hardware wallet, PSBT (partially signed bitcoin transaction) workflow if available, or a trusted multisig setup. Confirm the transaction on-chain and capture the transaction ID for records. Avoid pasting addresses in insecure apps; double-check QR codes and address checksums.

5. Provide custody guidance and backups

If you assisted with the wallet setup, make sure the recipient understands: keep the seed offline, metal backups are recommended, never share the seed, and consider secure storage like a safe deposit box. If you retain a recovery copy for estate reasons, be explicit in legal documents about how and when the copy is to be used.

Estate planning: passing Bitcoin to heirs in Canada

Passing Bitcoin on death or during incapacity requires planning. A will that mentions digital assets is a start but is often insufficient by itself. Consider the following:

• Legal instructions: Include clear instructions and the existence and location of hardware wallets and backups. Avoid writing down full seeds in a will; wills become public documents in probate.
• Trusted executor: Choose an executor familiar with Bitcoin or pair the executor with a technical trustee who can follow instructions.
• Splitting backups: Use Shamir Secret Sharing or split metal backups across trusted locations to reduce single points of failure while ensuring recoverability.
• Consider multisig inheritance: Set up a 2-of-3 multisig where one key is with the donor, one with a trusted family member, and one with a secure custodian. On death, the executor and co-signer can recover funds.

Do not put a full seed phrase directly in a will. Wills often enter public record and can expose your keys. Instead, reference safe storage and give clear instructions to the executor.

Recordkeeping and reporting

Keep comprehensive records: purchase receipts, dates and amounts, the gift agreement, transaction IDs, recipient address, and any communications. These records support correct CRA reporting and help the recipient establish a cost base for future dispositions. If you purchased BTC through Canadian exchanges like Bitbuy or Coinsquare, retain their statements and receipts for audit trails.

Security and common pitfalls to avoid

• Don’t email or text seed phrases. Use physical, offline methods for seed generation and backup.
• Avoid publicizing who received Bitcoin. Privacy reduces the risk of targeted theft.
• Beware social engineering when gifting high-value amounts. Scammers impersonate family members or lawyers to reroute transfers.
• Test addresses and watch confirmations before transferring large sums.
• Be cautious with Interac e-transfer funding; using Interac to fund purchases on exchanges is common, but watch for impersonation scams and ensure you deal with regulated services when converting to Bitcoin.

Examples and practical scenarios

Scenario A - Gifting to an adult child who is new to Bitcoin

Set up a hardware wallet in-person. Walk them through generating the seed, storing a metal backup, and making a small outgoing transaction. Transfer the gift after they demonstrate wallet control. Document the gift and retain receipts for CRA.

Scenario B - Legacy gift to heirs

Create a multisig vault with 2-of-3 signatures. One key is held by you, one by a trusted third party (for example, a law firm or trusted family member), and one by the designated heir. Specify in your estate plan how keys are accessed after death. This reduces the risk of a single lost seed destroying the estate.

When to consult professionals

Consult a tax advisor regarding capital gains, an estate lawyer to draft enforceable instructions, and a cybersecurity professional for high-value transfers or complex multisig setups. Exchanges and custodial platforms have their own rules, so seek platform-specific advice when converting fiat to Bitcoin for gifting.

Checklist: Safe Bitcoin gifting in Canada

• Document intent and retain receipts.
• Decide custody model: self-custody, assisted, escrow, or trust.
• Create and verify the recipient wallet; perform a test transaction.
• Use hardware wallets and offline backups; prefer metal backups for durability.
• Consider multisig for large gifts or inheritance.
• Keep secure records for CRA reporting and future cost base tracking.
• Consult tax and legal professionals for complex or high-value gifts.

Conclusion

Gifting Bitcoin in Canada can be a meaningful and efficient way to transfer wealth, support family members, or create a lasting legacy. Success depends on planning, clear documentation, secure custody practices, and an understanding of tax and estate implications. With the right approach and professional advice where needed, you can gift Bitcoin safely and confidently while protecting both the donor and the recipient.