This article is written by Nicole Ewing, Principal, Wealth Planning Office, TD Wealth

Parents and grandparents often help fund a child’s education using Registered Education Savings Plans (RESPs). These are tax-efficient vehicles that allow contributions, grants, bonds, and income to be invested in a tax-deferred environment to grow for eventual use toward post-secondary education. Generally, the parent/grandparent “subscriber” enters into an RESP contract with a “promotor” and names one or more “beneficiaries”. Plans can be designated as an individual plan, a family plan, or a group plan and there are unique estate planning considerations for each plan type. An RESP is a property interest of the subscriber and many will-drafters now include detailed language addressing what’s to happen on the death of the subscriber, such as whether the plan should be continued for the benefit of the beneficiaries or wound up with contributions returned to the estate or otherwise distributed.

What’s less common however, is planning for the incapacity of a subscriber. Even less common still are  clauses addressing continued gifts of a non-subscriber RESP funder (e.g. a grandparent who makes an annual gift to the grandchild’s parent to fund an RESP).

Rarely do we see POA documents with clauses specific to RESPs. Yet, given the potentially significant values at play, the variety of circumstances one can find oneself in, and the unique nature (and tax treatment) of RESPs, there is value in doing so.

Consider — can an attorney for property make changes to an RESP? Can they add children to a family plan if needed?  Can they designate a successor subscriber to the plan? What about collapsing the plan and using the funds toward the subscriber’s care instead of the child’s education, can that be done?

Should contributions to the RESP continue? If so, at what rate and frequency? Are there circumstances when refunds of contributions should be used for the incapable person? How much weight should be given to tax considerations? Does the attorney need to consider the tax treatment of an Accumulated Income Payment and the 20% additional tax before terminating an RESP? Do any of the answers change if there’s a joint subscriber?

The specific terms of the plan, provincial statute, common law, and individual agreements between parties can impact the answers – see for example Labatte v. Labatte 2022 ONSC 4787 for a review of how the terms of a separation agreement may bind outcomes. Education is of paramount importance in many families. Ensuring an attorney for property has the necessary information and powers to make critical funding and spending decisions is essential to helping our clients achieve what’s most important to them, during life, incapacity, and through their legacies.