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Post-secondary, 1/3, 1/3, 1/3 calculations

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  • rockscan
    replied
    A recent decision on RESP funds (July 4, 2024) from BC Supreme Court outlines how RESPs from grandparent's are considered:

    https://www.canlii.org/en/bc/bcsc/do...AEUkVTUAAAAAAB

    75] As for the RESP, that was established by the claimant's mother and is for the benefit of the children. No division is necessary. Presumably, if either of the children is in need of financial assistance for post-secondary education, the fund will be made available to them as a first resource before requiring a contribution from either parent.

    I am convinced that courts will follow this for funds from grandparent's. Meaning the money taken from the RESP comes off the top and should be used with parent's paying a share that is left.

    Again, my lesson: agree on the RESP and put it in writing of your separation agreement!

    Leave a comment:


  • rockscan
    replied
    Originally posted by donaldD View Post

    Challenger opened up the RESP before divorce. That RESP was in his name alone. When equalization was done it was counted for in the equalization (Challenger paid their ex cash for 1/2 of what was in the fund).
    Which means that RESP is solely his. His ex could have taken the money he paid her for the asset and opened her own. Either way, the RESP is now his alone for his portion of the expenses.

    1) Those funds are solely Challengers now to contribute to their portion of the education or simply take out of the RESP (grant money goes back to govt)?
    Yes but he doesn't have to send the grant funds back. When you withdraw from an RESP the bank asks what shares you want to withdraw—the principle or the grant funds. Always always always use the grant funds first. The reason why is that kid is taxed on those funds and since they are in school, their income is lower and they will not suffer with that taxable income.

    2) Challenger did not do this but if they did do that it sounds like the ex would double dip into that RESP once at equalization and again go in for education costs. So the purpose of this clause would end up hurting Challenger financially?
    No it's not double dipping. The ex was paid out for her share of the RESP. Much like being bought out of the house. She is no longer a holder of that asset. When the expenses come in, ex will have her share and Challenger will have his. She pays for her share with whatever means she has and that could be from the money she was paid for the RESP. Imagine it being a pile of cash. The account had $20,000 and he paid her half. He has $10,000 dollars and she has $10,000. Her share of the expense is $5,000 so she takes $5,000 from the pile of cash she has or elsewhere.

    Double dipping would be if she got the money from the RESP and then at expense time claimed she still had a right to the RESP.

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  • donaldD
    replied
    Originally posted by rockscan View Post
    Good thing for dad, he opened an RESP after the divorce and he has money put away for education costs. He takes it out of that account for his share.
    Challenger opened up the RESP before divorce. That RESP was in his name alone. When equalization was done it was counted for in the equalization (Challenger paid their ex cash for 1/2 of what was in the fund).

    Challenger kept contributing to the same account AFTER the divorce.

    1) Those funds are solely Challengers now to contribute to their portion of the education or simply take out of the RESP (grant money goes back to govt)?

    2)
    Which is a good lesson for those going through divorce. If you opened an RESP while married, have it locked in your agreement that the funds will be used for the combined parental share prior to calculating proportionate share.
    Challenger did not do this but if they did do that it sounds like the ex would double dip into that RESP once at equalization and again go in for education costs.
    So the purpose of this clause would end up hurting Challenger financially?

    Leave a comment:


  • rockscan
    replied
    Originally posted by donaldD View Post
    Challenger provided a scenario not in the first post. That first to claim every year seems horrible as it just makes people bitter if the other gets it.
    Who cares if the other party is bitter, they could have done it themselves but they didn't.

    1) So the suggestion here is to not put the RDSP as any individuals asset.
    2) Agree to equally contribute (proportionally?) to it. *this I added in.
    3) Agree that those funds (contribution + grant) get applied first to the parental total share to reduce the total amount the parents owe then split the remaining.
    4) In Challengers case it is all theirs. The other party can open their own RESP if they want and they can fight to claim the grant first
    AND that for Challenger it is good that there is nothing else put in the agreement about the RESP as it keeps it all theirs as it was claimed as an asset

    Is that correct?
    There is no suggestion. This is great financial advice. If you have the funds to open an RESP for your kids, do it as quickly as possible to get the grant funds. That RESP is now yours alone for your share. The grant funds in your RESP are yours.

    The rest of your questions are confusing. You can agree to whatever you want to but the law is: grant funds come off the total. 1/3 of the cost goes to kid who uses scholarships, loans and income. The remaining two thirds is split proportionate to income and the paying parent pays the net cost of their share. If there is an RESP opened by the parties pre-divorce, they can use all or some of it to reduce the cost.

    Example: tuition, books, residence, meal plan and equipment come to $20,000. Kid got $2,000 tuition grant as part of their OSAP funds. The new total is $18,000.

    Kid is responsible for $6,000. The new total is $12,000.

    Mom and dad opened an RESP when kid was a baby and will put $2,000 towards their share. The new total is $10,000 and is split proportionate to income.

    Mom is the recipient and her share is 30%, dad is the payor and his share is 70%. Dad's share then is $7,000 but the tax benefit is $500 making dad's actual share $6,500.

    Good thing for dad, he opened an RESP after the divorce and he has money put away for education costs. He takes it out of that account for his share.

    Leave a comment:


  • donaldD
    replied
    Originally posted by Challenger View Post

    Let's say couple married, opened RESP in name of only one parent, with mutual child being beneficiary. Divorce happens, the equalization and final orders made, but the RESP remains in the name of that one parent.
    1. When child goes to uni, would contribution from that account be considered as contribution from both parents, or from only one?
    2. What if the original plan owner parent continued using same plan post separation and contributed money there?

    Originally posted by rockscan View Post
    This may be one of those cross that bridge when you come to it kind of situations. I highly recommend though that you open your own RESP and get the grant money. As my husband learned, the first to the deposit gets the annual grant portion. He got all the grant funds in his RESP and his ex got nothing in the one she opened.
    Originally posted by rockscan View Post
    It was obviously assumed by one of you then if it wasn't specifically noted in the agreement that you will first subtract an amount from the RESP opened when the child was young. In which case, if it is solely owned by your ex then it is their money to use for their share of the costs. You would have received funds transferred as per your order/agreement.

    I have expect some insults or maybe even nothing. However, will post anyways.

    Challenger provided a scenario not in the first post.
    That first to claim every year seems horrible as it just makes people bitter if the other gets it.

    Originally posted by rockscan View Post
    Which is a good lesson for those going through divorce. If you opened an RESP while married, have it locked in your agreement that the funds will be used for the combined parental share prior to calculating proportionate share.
    1) So the suggestion here is to not put the RDSP as any individuals asset.
    2) Agree to equally contribute (proportionally?) to it. *this I added in.
    3) Agree that those funds (contribution + grant) get applied first to the parental total share to reduce the total amount the parents owe then split the remaining.
    4) In Challengers case it is all theirs. The other party can open their own RESP if they want and they can fight to claim the grant first
    AND that for Challenger it is good that there is nothing else put in the agreement about the RESP as it keeps it all theirs as it was claimed as an asset

    Is that correct?

    Leave a comment:


  • rockscan
    replied
    It was obviously assumed by one of you then if it wasn't specifically noted in the agreement that you will first subtract an amount from the resp opened when the child was young. In which case, if it is solely owned by your ex then it is their money to use for their share of the costs. You would have received funds transferred as per your order/agreement.

    Which is a good lesson for those going through divorce. If you opened an RESP while married, have it locked in your agreement that the funds will be used for the combined parental share prior to calculating proportionate share.

    Leave a comment:


  • Challenger
    replied
    Originally posted by rockscan View Post
    No was it listed in the equalization and agreement as being owned or taken over?
    The NFP was discussed out of court with lawyers, which resulted in one line "party A to pay party B" $xxx,xxx and judge made an order on that.

    Leave a comment:


  • rockscan
    replied
    No was it listed in the equalization and agreement as being owned or taken over?

    Leave a comment:


  • Challenger
    replied
    Originally posted by rockscan View Post
    Was it listed as an asset in your equalization?
    yes, nothing was hidden.

    Leave a comment:


  • rockscan
    replied
    Was it listed as an asset in your equalization?

    Leave a comment:


  • Challenger
    replied
    Originally posted by Tayken View Post

    There is no way you could benefit from a REGISTERED education savings plan for which you are NOT the sponsor. Just like you cannot benefit from the grandparents:
    .
    Let's say couple married, opened RESP in name of only one parent, with mutual child being beneficiary. Divorce happens, the equalization and final orders made, but the RESP remains in the name of that one parent.
    1. When child goes to uni, would contribution from that account be considered as contribution from both parents, or from only one?
    2. What if the original plan owner parent continued using same plan post separation and contributed money there?

    Leave a comment:


  • rockscan
    replied
    Either way what her parents do means nothing to the case. They can save all the money they want. This reads more as a petty argument that kid has rich grandparents.

    Leave a comment:


  • Tayken
    replied
    Originally posted by Brampton33 View Post
    My ex is claiming that because her parents opened the fund, SHE could use it as her contributions.
    Yes. She is correct. Happens all the time with grandparents who hold RESP accounts and are the sole sponsors.

    Originally posted by Brampton33 View Post
    It would seem to me that the most appropriate option would be to consider the fund belonging to the child.
    Nope. You do that and guess what? Grandparents will just dissolve the RESP and use a different tax shelter for the money and do the same thing. Its registered financial account of the grandparents not the child. The money is not the property of the child. They are the only tax beneficiary for which the money can be used tax-free.

    Originally posted by Brampton33 View Post
    So when we approach child about university, child can say that their share comes from grandparent's RESP.....and mom and dad must come up with their own 1/3 each.
    Actually, it gets worse... There is a 1/3 rule and its not hard and fast. People get that wrong all the time. University is a s.7 expense.... So its split on the proportion of incomes in different ways. It will be split proportionally between parents. See para 247 of C.S. v. D.A.S., 2020 ONCJ 16.

    Originally posted by Brampton33 View Post
    There is zero chance that my ex would suggest that we could mutually benefit from her parent's RESP fund for our child. She will say it belongs to her, and I am on my own.
    There is no way you could benefit from a REGISTERED education savings plan for which you are NOT the sponsor. Just like you cannot benefit from the grandparents:

    1. RRSP
    2. Pensions
    3. Investment Accounts
    4. Savings Accounts
    5. Employment Income

    Or any inheritance that your ex-wife should get!

    Money held in an RESP by the grandparents is no different than 1-5. Do you really want to make the bold decision to try and have the grandparents added as parties to the case? Especially ones with deep pockets.

    The best thing you can do... is save money for your children's education yourself. There is a high probability that the grandparents, by the time your children are in university may have passed on and a SIGNIFICANT amount of family wealth, for which you have no claim to, may change hands and you may find yourself dealing with Harold Niman and his co-council of choice.

    Do not enrage the rich in family law.

    Leave a comment:


  • Tayken
    replied
    Originally posted by rockscan View Post
    Tayken if you read that case, it notes that the EAP grant in the RESP is the child�s in the case and the judge ordered that the EAP should be apportioned per year to both parent�s benefit. Should also note that the RESP funds were applied to the costs prior to the claim to the father. The judge ruled that the $5,000 in annual EAP was to be applied to the costs prior to the proportionate split.
    You are somewhat correct about that case. As the money was "gifted" into a managed account by the parents. I am talking about actual REGISTERED accounts held in whole by grandparents. That is how it is done. I doubt you would find any "rich" grandparent that has any financial advisor worth their weight recommending to give the money to their adult child to put into an RESP account for which high-conflict separated parents are both the sponsor to the account.

    Remember, this is case law from 2007. It also has very few references and does not make it "jurisprudence" by any means. The judge in fact outlines that he can't follow the money in para 11. Based on my interpretation it is a single RESP account where both parents were sponsors and one parent put "gifted" money into it.

    Hence this quote:

    [11] It is not clear from the evidence, the amount of the RESPs that is available to Genevieve this year, gifted by other members of the family.
    A proper RESP held by grandparents, which I suspect the majority of situations are in 2020 are not "gifts" in that they gave the money to a 3rd party to invest on their behalf. They are registered savings plans that are owned by the sponsor (grandparents). The grandchildren are the tax-free beneficiaries of the money but, again, the grandparents are whom doles out the funds. As well, the money held in that account is the sole property of the grandparents. This is why they put the additional tax penalties on RESPs because grandparents were using them to avoid taxes on their investments.
    Its a 68% tax on the gains in the account if withdrawn by the sponsor now. :O

    Its a control game that rich people play. To the very wealthy... the 50,000 in an RESP is what they earn weekly. Just saying... I see these files all the time.

    The really good ones create one RESP in their names (grandparents) and one under the name of their adult child and leave the other parent out of it. Then they split the investments they make between the two accounts. Its all a game.

    Originally posted by rockscan View Post
    I�m sure we can argue this based on both of our experience�s which isn�t useful to the question. If someone wants to fight it they will and a judge will look at the RESP amount, planned expectations of the subscribers and what the grants are.
    Actually, you have to actually get a court to add the grandparents as a 3rd party to the case as they are um... NOT A PARTY TO THE CASE. Basically, the grandparents have every right to cash out the RESP at any time and pay the penalties.

    Originally posted by rockscan View Post
    For Brampton33, it doesn�t matter what your ex�s rich parents do to support their daughter and grandchildren. It�s not your business. If they open accounts and if they provide funds to them, that is within their right. HOWEVER, If their funds go over the share of your ex and your child then you can request that your share be calculated in accordance (ex. Kids share is $5,000, mom�s share is $5,000 and the resp amount applied was $11,000 then you can request the entire cost be reduced by $1000 then split). In my friend�s case the argument was that there were no expenses as they were paid in full by the resp funds and the judges agreed. The bigger argument will be whether it is worth the cost to argue it at the time. If you are spending $5,000 to save $1,000 and/or �be right� then you are wasting your time and money.
    Incorrect. Very very incorrect.

    This was a shared account for which the parents put "gift" money into. See para. 11. I suspect that Brampton33's rich ex-laws have their own RESP where they are the sponsors. Making them a 3rd party to the case. It would be like him making a claim to the grandparents regular bank accounts LOL.

    Trust me... No one "gifts" RESP money after a separation into an account where both parents are sponsors. Especially wealthy ones who have financial advisors who are managing family wealth that will transition over generations.

    If Brampton's ex-laws are stupid enough to put the money into an account that both he and the other parent are sponsors of... then this case law applies... otherwise... its useless case law and its small treatment of a whopping 4 cases since 2007.

    The court does not have jurisdiction over the RESP accounts where grandparents are the sole sponsors of that account sorry to say... This is where we may not be connecting.

    I have a high doubt that Brampton33 is a sponsor on the account he is discussing and that the ex-law grandparents are the sole sponsors to protect that money from meddling hands.

    Leave a comment:


  • rockscan
    replied
    Tayken if you read that case, it notes that the EAP grant in the RESP is the childs in the case and the judge ordered that the EAP should be apportioned per year to both parents benefit. Should also note that the RESP funds were applied to the costs prior to the claim to the father. The judge ruled that the $5,000 in annual EAP was to be applied to the costs prior to the proportionate split.

    Im sure we can argue this based on both of our experiences which isnt useful to the question. If someone wants to fight it they will and a judge will look at the RESP amount, planned expectations of the subscribers and what the grants are.

    For Brampton33, it doesnt matter what your exs rich parents do to support their daughter and grandchildren. Its not your business. If they open accounts and if they provide funds to them, that is within their right. HOWEVER, If their funds go over the share of your ex and your child then you can request that your share be calculated in accordance (ex. Kids share is $5,000, moms share is $5,000 and the resp amount applied was $11,000 then you can request the entire cost be reduced by $1000 then split). In my friends case the argument was that there were no expenses as they were paid in full by the resp funds and the judges agreed. The bigger argument will be whether it is worth the cost to argue it at the time. If you are spending $5,000 to save $1,000 and/or be right then you are wasting your time and money.

    Leave a comment:

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