RESP question

[ottawa_divorce_dad]

I have always managed the finances (mom had no interest or expertise - not that I am claiming to be an expert but atleast I try ). So the RESP account is in my name (no joint privileges).

I had initially assumed that RESP accounts would get removed from the calculation coz they "belong" to the beneficiary - i.e. kid(s). But as I think about it more (and based on the questions i am getting from the other lawyer), I can see the logic in mom wanting to split the account so that eventually she can clearly indicate her contribution towards the kid(s)'s education.

So my question is - do you just split the existing account and make mom the controller of one half? That way both can continue to independently make contributions as they wish.

I have repeatedly suggested that we continue the existing account and both make equal contributions to the account on a regular basis. But she has not responded. So I am quite ready to move on and continue to do my bit. When it comes time for the funds to be used, it'll be her problem to bring forth equivalent contributions towards the education expenses.

Or is there a better way to handle this?

[ddol1]

I believe a child can have more than one RESP ACCOUNT - mom, grandpa, which would be in trust with the child in question. The issue one needs to take care is the contributions belong to the contributor, any gains or interest belongs to the child -- so if the account is set up joint with mom and dad; either parent could then withdraw ALL the contributions made by both parents, or grandparent can be withdrawn by any adult given signing/joint authority of the account.

you could remove half and transfer it to your ex and your child in a separate REESP account once you are separated. Although I was the physical contributor my spouse was also joint; ex's first step was to drain the REESP (I assume to transfer to a new account, one without my name as contributor. To the ex, it remains about control and more.....

[golf.fanatic]

I've just set up RESPs for my kids, their only ones. Do my contributions to it count toward their education costs when they eventually get to that point (i.e. as my part of their s. 7 expenses)? Do the government grants, interest, etc. earned in those accounts as a result of those contributions also count as my part of the s. 7 expenses when that time arrives?

[Pursuinghappiness]

I've just set up RESPs for my kids, their only ones. Do my contributions to it count toward their education costs when they eventually get to that point (i.e. as my part of their s. 7 expenses)? Do the government grants, interest, etc. earned in those accounts as a result of those contributions also count as my part of the s. 7 expenses when that time arrives?

Do you already have your separation agreement in place? If so, read through it to see how RESP contributions are handled. If not, you might want to come up with a strategy for getting it written in there. For instance, mine is set-up so that all my D's RESP funds get exhausted first before we start S7 contributions at our proportional level once she gets to university. So because I had several lump sum payments that went to my D for inheritance from my family members after I separated, it was not in my best interest to add those to her RESP ...instead I opened a TFSA for those funds.

[golf.fanatic]

Actually am divorced. RESP set up well after that, so nothing preexisting.

[dad2bandm]

Actually am divorced. RESP set up well after that, so nothing preexisting.

To answer golf.fanatic quickly, and trying not to hijack the OP's thread...

mcdreamy posted these cases in another thread of mine, where post-seperation RESP contributions were deemed to be the contribution of the account holder.

CanLII - 2008 BCSC 1316 (CanLII)

CanLII - 2010 SKQB 397 (CanLII)

CanLII - 2010 SKQB 409 (CanLII)

CanLII - 2012 ONSC 6043 (CanLII)

CanLII - 2010 ONSC 4030 (CanLII)

There have also been cases, where ex'es try to have all the RESP contributions counted as the child's first, then each parent has to split remainder; this is usually pulled by the parent, who never contributed at all, and who tries to lessen their share. So use this case law, if that ever comes up.

[dad2bandm]

So my question is - do you just split the existing account and make mom the controller of one half? That way both can continue to independently make contributions as they wish.

I have repeatedly suggested that we continue the existing account and both make equal contributions to the account on a regular basis. But she has not responded. So I am quite ready to move on and continue to do my bit. When it comes time for the funds to be used, it'll be her problem to bring forth equivalent contributions towards the education expenses.

Original poster...

Are you in the midst of seperating/divorcing? Sounds like it. Your best bet would be to consult your lawyer about this. It seems logical it would be split, or if not split, part of those contributions as counting towards her share of post-secondary expenses? But again, probably consult on someone about that, who has more details.

If the RESP account is not "joint", then your ex is likely not keen on the idea of throwing money into your account, since you as the account holder would have complete control over it. (I'm thinking down the road, once you are divorced). If child does not go to school, you could collapse the account, and keep the money, as an example. (not saying you would, but that is a possibility).

Children can have multiple RESPs, so your ex could open her own for child, and her contributions could go into that. Also, existing contributions could likely be transferred to that as well.

If existing contributions in your RESP were made during your marriage, I think your ex can very easily claim (at the time the child goes to school), that part of those contributions should count as her share, or at least child's share, and you could find yourself on the hook for splitting the remainder of post-secondary costs, even though you already contributed. So best to get this worked out now, rather than later.

[golf.fanatic]

To answer golf.fanatic quickly, and trying not to hijack the OP's thread...

mcdreamy posted these cases in another thread of mine, where post-seperation RESP contributions were deemed to be the contribution of the account holder.

CanLII - 2008 BCSC 1316 (CanLII)

CanLII - 2010 SKQB 397 (CanLII)

CanLII - 2010 SKQB 409 (CanLII)

CanLII - 2012 ONSC 6043 (CanLII)

CanLII - 2010 ONSC 4030 (CanLII)

There have also been cases, where ex'es try to have all the RESP contributions counted as the child's first, then each parent has to split remainder; this is usually pulled by the parent, who never contributed at all, and who tries to lessen their share. So use this case law, if that ever comes up.

Thanks! this is helpful!

[mcdreamy]

If existing contributions in your RESP were made during your marriage, I think your ex can very easily claim (at the time the child goes to school), that part of those contributions should count as her share, or at least child's share, and you could find yourself on the hook for splitting the remainder of post-secondary costs, even though you already contributed. So best to get this worked out now, rather than later.

Most of what I've read seems to indicate pre-separation RESP's are often considered as the contribution of the child; most definitely the grants/interest earned both pre and post separation are.

OP, I would split the account if she agrees. If not, open up a new one, in your own name/child name post-separation.

And just a note - making equal RESP contributions may not be feasible for many people post separation. If it is a choice between food on the table or an RESP contribution, I'm buying food.

[Murphys_Law]

I have always managed the finances (mom had no interest or expertise - not that I am claiming to be an expert but atleast I try ). So the RESP account is in my name (no joint privileges).

I had initially assumed that RESP accounts would get removed from the calculation coz they "belong" to the beneficiary - i.e. kid(s). But as I think about it more (and based on the questions i am getting from the other lawyer), I can see the logic in mom wanting to split the account so that eventually she can clearly indicate her contribution towards the kid(s)'s education.

So my question is - do you just split the existing account and make mom the controller of one half? That way both can continue to independently make contributions as they wish.

I have repeatedly suggested that we continue the existing account and both make equal contributions to the account on a regular basis. But she has not responded. So I am quite ready to move on and continue to do my bit. When it comes time for the funds to be used, it'll be her problem to bring forth equivalent contributions towards the education expenses.

Or is there a better way to handle this?

I would suggest transferring 1/2 the funds in the existing account to a new RESP. A child can have more than one RESP but the grants are allocated according to the total contributions to all RESPs based on the child's SIN. Timing may be an issue as whoever contributes earliest in the calender year gets first dibs on the grant for that contribution up to the maximum allowed for the annual contribution. Make sure that you have a clause in your agreement that states grants and bursaries are deducted off of Section (7) post-secondary expenses before the parent's determine their respective shares of the balance.

Once the second RESP is opened, each RESP should be controlled or "owned" by one parent only. This way, a parent can maintain ownership of his/her contributions and should they ever need to withdraw the funds, they will be taxed and attributed to the proper person. This also ensures no argument in the future over who paid what.

[Murphys_Law]

Here's an added twist:
How do you treat an RESP set up and funded by the parents of your ex?
The RESP was not included in division of assets. I have never had access to a statement showing the amounts involved or the terms. My ex's parents were deceased after the separation, before the divorce and before post-secondary education started. Should it be treated as a gift to the child and applied before the sharing of post-secondary costs or should it be treated as belonging to my ex and part of only his side of the contribution to section (7) expenses?

[ottawa_divorce_dad]

Original poster...

Are you in the midst of seperating/divorcing? Sounds like it. Your best bet would be to consult your lawyer about this. It seems logical it would be split, or if not split, part of those contributions as counting towards her share of post-secondary expenses? But again, probably consult on someone about that, who has more details.

If the RESP account is not "joint", then your ex is likely not keen on the idea of throwing money into your account, since you as the account holder would have complete control over it. (I'm thinking down the road, once you are divorced). If child does not go to school, you could collapse the account, and keep the money, as an example. (not saying you would, but that is a possibility).

Children can have multiple RESPs, so your ex could open her own for child, and her contributions could go into that. Also, existing contributions could likely be transferred to that as well.

If existing contributions in your RESP were made during your marriage, I think your ex can very easily claim (at the time the child goes to school), that part of those contributions should count as her share, or at least child's share, and you could find yourself on the hook for splitting the remainder of post-secondary costs, even though you already contributed. So best to get this worked out now, rather than later.

Yes I am in the midst of a separation.

The ex did nothing wrt RESP - wouldn't even know what the annual limit is, let alone decide on how to invest the funds. Anyway, for the last 2 months, I have repeatedly asked for a response on RESPs ... does she want to continue contributing in the same account i.e. we both put in equal sums each month and max out the contributions each year and in the end do a 50-50 split between us wrt our respective contributions towards education. No response yet.

My next option is that the ex takes half of the balance on the day of separation and does whatever so that i am then free to continue putting in my share.