With our rising education costs, Registered Education Savings Plans (“RESP’s”) are becoming a popular way to save for a child or grandchild’s education. What happens however when the RESP subscriber, being the person who set up the RESP, dies? Many think that RESP’s are treated the same as RRSP’s, but that is not true. They are not a trust, but rather a contractual arrangement. On death, RESP assets do fall into the subscriber’s estate, despite the fact that a beneficiary is named on the RESP. Probate fees are then levied, and because the RESP has not been used as intended (to fund education), the Canada Education Savings Grant that may have been received by the RESP fund, would have to be paid back to the government, and in addition, your estate would face tax on the accumulated income.
To avoid this situation, consider appointing a successor subscriber in your will, or appointing a testamentary trust as a successor subscriber, such that a portion of your estate will be contributed to the RESP until a certain time.
HOW WE CAN HELP:
We understand that these issues are very complex. Please feel free to contact one of our lawyers for more information on dealing with RESP’s through your will.