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How do I incorporate an RESP account in my estate plan?

estate planning Jul 15, 2020

RESP’s have become a cornerstone in most people's plan for saving for their children or grandchildren’s education. More and more estates are having disagreements arise over larger sums in RESP’s because many subscribers ( also known as the person who created and contributes) to RESP’s are not taking the time to appoint a person to take over this role if they should pass away. This means that when the initial subscriber dies the RESP funds go into their estate rather than to the person who the RESP was created for. Unfortunately, most people do not include an RESP clause in their will.

If a subscriber dies, then their estate must administer the RESP according to the contract and the Alberta laws governing estate property. This includes the Income Tax Act, that defines when a successor subscriber can continue or preserve an RESP.

The simplest method of establishing who can take over the RESP if the subscriber dies is to specifically include the RESP in your will and outline who takes it over and where these funds go upon the death of the original subscriber. The will should direct the transfer of all the RESP rights and obligations to another person who will become the successor subscriber. The successor subscriber should be trustworthy and close to the child or grandchild who will benefit from the RESP so that they properly manage these funds.

When no successor subscriber is appointed in the will, it can be impossible to arrange for the continuation of the RESP. The RESP money becomes part of the RESP creator’s estate and does not belong to the RESP beneficiary. This means the Executor of the estate cannot allow anyone to step in and take over the RESP and continue it and allow it to fund the education of the RESP beneficiary. The end result is that the RESP is cancelled and no longer available for the child or grandchild who was to benefit from it.

If you are funding an RESP for your children or grandchildren and would like help to ensure these funds go to your children or grandchildren upon your death, give our office a call!  With over 15 years of experience, we are here to help you leave solutions and not problems for your loved ones.


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