In this Post, we will consider estate planning for your interest in an RESP.
Registered Education Savings Plans
Property rights are a provincial issue under the Canadian Constitution. Each province has legislation as to what capital property can have a named beneficiary and pass outside of a deceased’s estate.
For example, in Ontario, the legislation for life contracts is the Insurance Act, R.S.O. 1990 and the legislation for everything else is the Succession Law Reform Act, R.S.O. 1990. Every province has something similar.
So, you can name a beneficiary for:
- a life insurance contract and a segregated fund contract;
- a pension, retirement, welfare or profit-sharing fund, trust, scheme, contract or arrangement or a fund, trust, scheme, contract or arrangement for other benefits for employees, former employees, directors, former directors, agents or former agents of an employer or their dependants or beneficiaries;
- a fund, trust, scheme, contract or arrangement for the payment of a periodic sum for life or for a fixed or variable term (i.e., a life annuity or term annuity);
- a retirement savings plan, a retirement income fund and a home ownership savings plan as defined in the Income Tax Act (Canada) and an Ontario home ownership savings plan under the Ontario Home Ownership Savings Plan Act (N.B., there are no longer any home ownership plans); and
- a tax-free savings accounts within the meaning of the Income Tax Act (Canada).
However, the prescribed plans do not include a Registered Education Savings Plan or a Registered Disability Savings Plan.
The contributions to an RESP belong to the subscriber. If the RESP contributions are owned as a joint tenancy by you and your spouse/common-law partner, they would pass to the survivor under the right of survivorship.
Otherwise, the contributions would be part of your estate. In your Will, you could name a testamentary trust for your children (the income beneficiaries of the RESP) as the successor subscriber. A testamentary trust would qualify as a subscriber provided the trust acquires the deceased’s rights to the RESP.
If you were to leave additional assets to that trust, the trust could contribute to the RESP after your death. However, it might be simpler for the surviving spouse/common-law partner to establish another RESP to complete the implementation of the education plan.
So, if you are the subscriber to an RESP, your first choice would be to own it as a joint tenancy with your spouse/common-law partner. Your second choice would be to bequeath it through your Will to a testamentary trust for your children. You cannot name a beneficiary on the contract.
John Gobeil, BSc, CFP®
David Gobeil, CPA, CA, CFP®
Certified Financial Planner® and CFP® are certification marks owned outside the U.S. by the Financial Planning Standards Board Ltd. The Financial Planners Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB.