With the end of the school year quickly approaching, it seemed like a good time to consider this question. At our law office in Ottawa, we are asked this question time and time again by the executors we work with and by our estate planning clients. Many are surprised at the answer.
A Registered Education Savings Plan (RESP) is often opened by a parent or grandparent, the subscriber, to save for the post-secondary education of a child or grandchild. Many subscribers mistakenly assume that upon their death the RESP will be treated like other registered assets, such as TFSAs and RRSPs, which pass directly to the beneficiary that they have named.
However, the RESP is actually “owned” by the subscriber until the money is paid out for the child’s education. If an RESP has just one subscriber who dies, the part of the RESP that the subscriber is entitled to is considered a part of the subscriber’s estate and estate administration tax (or probate tax) is payable. If the RESP has joint subscribers (must be spouses or common law partners), on the death of one of the subscribers the RESP passes to the surviving subscriber and does not form part of the deceased subscriber’s estate. As a result, no estate administration tax is payable.
If you are a subscriber of an RESP for a loved one, it is important to name a successor subscriber in your Will if you want the RESP to be continued after your death. If the RESP belongs to a sole subscriber who dies, it could be argued that the contributions should be returned to the subscriber’s estate. In our experience, this is not what most parents and grandparents want to happen with the RESP.
Do you have an RESP for a loved one and are wondering if you have properly dealt with the RESP in your estate planning? Call 613.836.9915 or email [email protected] to make an appointment to meet with me at my law office in the Kanata-Stittsville area of Ottawa. We will review your estate planning and ensure that the investment you have carefully set aside for the education of your child or grandchild will be available when needed.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.
