By Beverly Carter, Notary Public – Carter Notary, Victoria, BC
Saving for your children’s education is one of those things you may start when they are very young, knowing the money will not be needed for years. You open a Registered Education Savings Plan (RESP), contribute when you can, and hopefully, take advantage of government grants that help those savings grow.
The money in an RESP for your kids has a specific purpose. It’s there to help your children with the cost of their education and give them a stronger financial start as they move into adulthood.
When I meet with a client to prepare a Will, we talk about much more than who gets what. There can be many pieces to a bigger picture of what you own. And recently, during a Will interview, I asked the right questions to discover the client had an RESP established for the children. And we came to the question: What happens to your RESP if you die before your children have finished using it?
Your Children May Benefit From the RESP, But They Don’t Control It
One of the important things to understand about an RESP is the difference between the beneficiary and the subscriber. Your children may be named as beneficiaries because the money is intended to support their education, but that does not mean they own or control the RESP.
The subscriber is the person who establishes and controls the plan. In a family RESP, parents may be joint subscribers, which can provide some continuity if one parent dies and the surviving parent continues managing the RESP.
Subscriber vs. beneficiary is an important distinction when preparing a Will. And it means looking further ahead. What happens if the surviving subscriber later dies while there is still money in the RESP for your kids? If your children are young, or even if they are already attending post-secondary school, there may still be years before the RESP has served its full purpose.
Planning for a successor subscriber can help address what happens next.
Your Will Can Do More Than Divide Your Estate
It is easy to think of a Will primarily as a document that says who receives your property when you die. You may be focused on who gets your home, savings and personal belongings, who will act as your executor and, if your children are minors, who you would want to care for them.
All of those decisions are important, but effective estate planning requires looking at more than a list of assets and beneficiaries. It means understanding how the different pieces of your financial life are structured and what happens to each of them when you die.
Not everything necessarily passes through your Will. Assets can be affected by joint ownership, beneficiary designations, and other arrangements. RESPs also have their own rules, which means they deserve specific consideration when you are putting together or reviewing your estate plan.
Where appropriate, your Will may include provisions appointing someone to take over as the RESP subscriber. This can give another person the authority to continue administering the RESP for your kids so it can support the educational goals you originally intended it to fund.
Yes, Planning for the RESP for Your Kids Matters
Consider a family that has contributed to an RESP for 10 or 15 years. The parents have consistently put money aside, received applicable government grants, and built a meaningful education fund. Then the remaining parent dies before the children have finished their education.
Without appropriate planning, the RESP for your kids may not automatically continue exactly as the parents expected. Depending on the RESP, its terms, and the individual circumstances, there could be tax consequences, repayment of government grants, or other complications if the plan needs to be collapsed rather than continuing for its intended purpose.
That possibility is especially frustrating because there was never any question about what the parents wanted. They spent years saving the money specifically to help their children pursue an education.
Including the RESP in the estate planning conversation helps turn that intention into a more complete plan. Instead of assuming someone will be able to take over, you can consider ahead of time who you trust to manage the RESP if you are no longer able to do so.
This Is Why I Look Beyond the Will
At Carter Notary, preparing a Will is about more than asking, “Who do you want to leave everything to?” I want to understand the bigger picture so your estate planning documents reflect how your life and finances are actually structured.
That means I ask questions about whether you own property jointly, have life insurance, hold registered investments or pensions, have minor children, or have established RESPs. Who controls these assets now? And who will be able to control them if you die? Sometimes my job is simply to spot the issue and say, “We should find out how this works before we finish your Will.”
Sometimes an asset that seems relatively straightforward reveals an estate-planning issue that the client simply hadn’t considered. An RESP is a good example because parents may understandably think that because the money was saved for their children, it will automatically remain available to them for that purpose.
Taking the time to discuss the RESP as part of your estate planning can help make sure the plan you put in place supports the work you have already done.
Bring Your RESP Information to Your Estate Planning Appointment
If you have an RESP, especially if your children are minors or still have several years before completing their education, include it when reviewing your estate plan. Find out:
- who is currently named as the subscriber or joint subscriber;
- what your RESP provider says about what happens if a subscriber dies;
- whether a successor subscriber can be appointed; and
- whether your Will should contain specific provisions dealing with a RESP.
These may seem like small details compared with some of the larger decisions involved in creating a Will. But a relatively small provision in your estate planning documents may help protect a financial plan you have spent many years building.
Make Sure Your Estate Plan Supports the Future You’re Planning For
Estate planning isn’t only about deciding who gets what. It is also about looking at the plans, accounts, and structures you have already established and considering whether they will continue to work the way you intended when you are no longer here to manage them.
If you have taken the time to save for your children’s education, your RESP deserves to be part of that conversation. Contact Carter Notary to discuss your Will and estate planning needs and make sure the plans you have put in place for your family’s future are reflected in your estate plan.
This article provides general information about estate planning in British Columbia. It is not financial, investment, tax, or legal advice regarding your particular circumstances. Carter Notary provides estate planning services in British Columbia. Every estate and RESP is different. Questions about the operation of a particular RESP should be directed to your RESP provider or appropriate financial professional. Please consult your RESP provider or appropriate financial professional regarding the specific terms and requirements of your plan.