Families with young children are encouraged to start saving for their education as early as possible. The RESP is one of the most popular methods used to accomplish this; however, it is not uncommon for it to become the subject of disputes if the parents later separate or divorce. One of the issues that arose this past year specifically looked at the possibility of a spouse removing the other as co-holder of an RESP that was created for the benefit of their mutual children. By categorizing the RESP as a trust, the court held that in certain circumstances, removal was a possibility.
In McConnell v McConnell (2015 ONSC 2243, CarswellOnt 4939), the court looked at the nature of the RESP. It determined that it is essentially a trust fund held by a trustee on behalf of the children, who are the beneficiaries. Furthermore, as long as the three certainties are met, there is no real need for an express declaration of trust.
By determining that the RESP is a trust, the removal of a spouse as co-holder can be looked at through the lens of trust law. The court concluded that trustees of an RESP must be able to act unanimously. If the trustees cannot cooperate to the detriment of the beneficiaries, then removal of a trustee may be appropriate.
Removal of a spouse as co-holder of an RESP is not a novel concept. However, the categorization of the RESP as a trust now allows the courts to do so through established recourses traditionally available for the removal of trustees. The parent account holder as a trustee may be held to higher standards of accountability as a fiduciary. As such, for those seeking to have a co-trustee removed, remedies for breach of fiduciary duties may be available.
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