Beginning of September for many parents means children heading off to post-secondary education. It is an exciting time for many people who are embarking on a new journey. For some, it is also a very daunting task to fund their education.

One tool that has often been used by parents to help their children with the expenses of entering post-secondary education is a Registered Education Savings Plan (“RESP”). The plan is funded by the parents for the future use of their children once they have entered post-secondary education. But what happens if one parent refuses to consent to the use of the funds for the child’s education?

That is the question the court had to answer in Labatte v Labatte,  2022 ONSC 4787. The parents separated in 2010 and in 2022, one of their daughters was accepted into an undergraduate program at McGill University. She notified her father that she would need to use the money from the RESP that named her a beneficiary. The father argued that each parent should share the expense of their daughter’s post-secondary education based on their incomes. He sought an order splitting the RESP into two plans with each subscriber (contributor) receiving an amount relative to their contributions. In response, the mother sought an order transferring the RESP into solely her name for the purpose of funding their children’s education.

The court had to determine whether the assets in the RESP are the property of the subscriber or are held in trust for the beneficiary. The court found that there was no certainty in the case law on this question and having regard to solely the statutory framework of a RESP, it does not establish a trust for a beneficiary given that the Income Tax Act permits a subscriber to, at any time, obtain a refund of their contributions.

However, the court went further to state that a RESP will not be the property of the subscriber if the actions of the subscribers lead to the conclusion that the RESP is being held in trust for the beneficiary. Therefore, the three certainties of a trust have to be present: (a) certainty of intention; (b) certainty of subject matter; and (c) certainty of objects.

In this case, the court found that the three certainties had been met because the separated couple had executed a Partial Separation Agreement (“PSA”). The PSA stated:

‘The RESPs maintained by the parties shall be used for the children’s postsecondary education.’

The use of the word “shall” established a legal obligation that the RESP be used for the beneficiaries, the subject-matter of the trust was certain given the reference to the RESP and the object of the trust was also certain given that the children were identified as the beneficiaries.

The court granted the mother’s order and transferred the RESP solely into her name so that the funds could be used for the daughter’s post-secondary education.

For parents looking to use RESPs for their children’s future education expenses, it is important to consider the fact that courts may not presume that the funds are held in trust for the children. It is necessary for parents to prove that all elements of a trust are evident if ever a dispute arises.

Thank you for reading.