RESPs are often viewed as education savings tools, but they can also raise important estate planning questions.
In this video, Erika Friesen, Portfolio Manager, explains why families should think beyond simply opening and funding an RESP. She discusses how ownership, wills and trust agreements can affect what happens to an RESP if a subscriber dies, and why proper planning can help protect both the account and the original intention behind it.
Transcript
I’m Erika Friesen, a Portfolio Manager at Newport Private Wealth, and a mom too.
Here are some considerations about Registered Education Savings Plans that you may not have thought about before.
If you’ve opened an RESP account, you already know this is an investment strategy to help pay for a child’s education. RESPs are typically opened by parents who act as joint subscribers, but anyone can open an RESP for a child.
Investments grow tax-free until money is used to pay for post-secondary education. RESPs are a wonderful tool to help children pursue higher education, whether that’s an apprenticeship program, college or university.
But RESPs can also have estate planning implications that you may not be aware of.
RESPs typically belong to the subscribers and could become assets of an estate upon the death of the last subscriber. Ambiguity around RESP accounts can lead to confusion for executors and even potential conflicts between beneficiaries.
The solution is straightforward: ensure there is an appropriate RESP clause in your will, or have a written RESP trust agreement established.
Here’s why that’s important.
Appropriate legal protection for your RESP can help avoid some of the following issues. First, the RESP could collapse. Unused Canada Education Savings Grants would have to be repaid, and net proceeds would be deposited into the estate, which could have both tax and probate fee implications.
Funds may also become available to creditors of the estate, or any remaining RESP funds could be distributed to the beneficiaries named in the will.
Seek expert advice and take steps to ensure your investment is safeguarded now and into the future. It’s an important component of estate planning.
A qualified lawyer can help structure your will in the right way to protect your RESP account.
This will help ensure your wishes are carried out as intended.
For more than 20 years, Newport has been helping families make the most of the opportunities they’ve created for themselves.
If you have questions about RESPs or how your investments can be protected, let us show you how.
