It is not uncommon for a testator to leave a gift to a beneficiary who may still be a minor when the testator dies. Usually in this scenario, the testator has specified that any gifts to minors be held in trust until the beneficiary reaches a certain age (often the age of 18). Absent any specific prohibitions in the Will, an estate trustee may wonder if they can contribute funds held in trust for a minor to an RESP for their benefit.

A Registered Education Savings Plan is a tool through which to contribute and save for a child’s future post-secondary education costs. Canada Revenue Agency’s website describes an RESP as follows:

“A registered education savings plan (RESP) is a contract between an individual (the subscriber) and a person or organization (the promoter).

Under the contract, the subscriber names one or more beneficiaries (the future student(s)) and agrees to make contributions for them, and the promoter agrees to pay educational assistance payments (EAPs) to the beneficiaries.”

One of the most attractive benefits of an RESP is that payments of up to $2,500 per year can qualify for a 20% contribution from the government called a Canada Education Savings Grant (CESG). Low-income families who contribute to an RESP may also qualify for a $500 Canada Learning Bond or other provincial government incentives. 

If a Will provides an estate trustee with the discretion to use/invest the trust funds for the minor as they see fit, an RESP may seem like a prudent choice. However, this option may not be available or may not otherwise be viable for two primary reasons:

• First, an estate trustee cannot open a new RESP account on behalf of the estate, as per the Canada Revenue Agency (as an estate cannot be a party to an RESP contract). 
• Second, the owner of an RESP account is the subscriber (the person who opens the account), not the beneficiary. The subscriber can generally withdraw funds for any purpose at any time. The child beneficiary cannot demand the money, even once they have attained the age of majority.

That said, estate trustees should be cognizant of their options and responsibilities if the testator has opened RESP accounts for minor beneficiaries during their lifetime. For example, some financial institutions allow the initial RESP subscriber (i.e., the testator) to name a successor subscriber to take over the account in the event of their death. In this case, a living subscriber may be able to appoint an individual successor subscriber (typically their estate trustee) as the successor subscriber for their RESP account. A testator may also include terms in their Will directing their estate trustees to contribute to another subscriber’s RESP account (for example, if the testator is a grandparent, they could direct their trustees to contribute to the RESP account for which their child is the subscriber, for the ultimate benefit of the testator’s grandchildren), keeping in mind that the subscriber may retain control over the funds. 

Further, if an RESP account is owned by a testator who dies and there is no successor subscriber named and no joint subscriber, it is possible that the account may need to be closed, may be subject to probate fees, require repayment of government grants and bonds, be partially taxable, and/or need to be distributed based on the terms of the Will as an asset of the subscriber’s estate rather than a fund that will automatically be payable to the child for whom the RESP was established.

Estate planning lawyers should consider asking clients about RESPs that they may themselves hold or those that have been established by others for the benefit of family members to whose educational costs they may choose to contribute. It may also be wise to encourage clients to check with the financial institution holding the account to confirm that the testator’s wishes regarding RESPs for which they are the subscriber can be implemented as part of an estate plan. 

Thank you for reading, and have a great rest of your day.

Suzana Popovic-Montag and Marie Kazmer