RESP Designations in Your Will
In recent months, I've seen more Wills than usual with provisions for RESP's. Are there advantages to naming a successor to your RESP in your Will, and what are the risks associated with failing to do so? For a background on the many advantages associated with RESP's and investing in your child's future, see here.
Section 146.1 of the Income Tax Act deals with this issue, and of course it's always useful to review the specific terms of the RESP policy. The testator should consider whether they intend to continue the plan for the benefit of the beneficiaries after their death, or whether they would prefer to wind up the plan. If they elect to wind it up, the contributions within the plan can be returned to the estate or distributed to the intended (or other) beneficiaries.
Typically, a testator with an RESP plan has young children and opts to continue the RESP for their benefit. Thought will need to be given to who will be the succeeding subscriber - keep in mind that the subscriber can withdraw contributions from the RESP and receive accumulated income payments, which can be rolled over into their own RRSP. Drafting issues to highlight are providing the funding to continue the contributions, naming the intended beneficiaries, investment guidance, and limits (if any) on withdrawls of contributions by the subscriber. If your Will fails to name a successor, current tax law allows anyone making contributions to become a subscriber. However, if you would prefer to choose your subscriber and your intention is for the capital in the plan to be used by the beneficiary, then you should consider designating a successor in your Will.
Lastly, don't forget that if the RESP is jointly owned by parents (which is not unusual), a mirror provision should be included in both owners' Wills.
Sarah Hyndman Fitzpatrick
