Separation and divorce
Managing your child’s RESP when you break up
If you’ve invested in a Registered Education Savings Plan (RESP) to finance your child’s post-secondary education, you might be wondering what options are available to you in the event of a breakup. Here’s what you need to know about your rights and what you should consider when it comes time to make a decision.
Who is the subscriber under the plan?
First of all, you need to confirm the name of the subscriber under the child’s RESP. Generally, the subscriber is the person who opened the RESP and whose name appears on the original contract.
Both parents can also be joint subscribers under the RESP. This is generally the case where they have opened the RESP together.
If you’re not sure, contact your RESP promoter.
When only one parent is the subscriber
In principle, the parent registered as the subscriber can decide to withdraw the contributions made under the RESP and to use this money as he or she chooses without the other parent’s authorization. The source of the funds invested in the RESP is not important; all that matters is that this parent is the subscriber.
A parent who wishes to withdraw funds from the RESP before the child is eligible, however, should bear in mind that fees or penalties may apply.
The money in a child’s RESP can sometimes be the subject of financial compensation upon divorce, even if only one spouse is the subscriber. This is the case, for example, when the amounts invested in the RESP came from one of the spouse’s acquests, i.e., the property or money that must be divided with his or her ex upon divorce.
In such a case, the parent who is not the subscriber can ask a judge to allow him or her to manage the RESP or impose certain restrictions on the parent subscriber when it comes to withdrawing money from the RESP.
When the parents are joint subscribers
When the parents are joint subscribers underthe RESP, their rights depend on what they want to do: continue to contribute or withdraw funds.
Continue making RESP contributions
An RESP opened jointly by the parents can remain open even if they’re no longer together. Both parents can continue making contributions to it for their child’s future benefit.
In their separation or divorce agreement, parents can specify how much each of them will contribute to the RESP in the years to come. However, each parent’s undertaking to contribute to the plan must be voluntary. A judge can’t order a parent to continue contributing to the RESP, unless this parent has asked the judge to recognize his or her undertaking.
Withdrawing funds or closing the RESP
First of all, don’t forget that there may be penalties if parents decide to withdraw funds from the RESP before the child is eligible.
If the parents still wish to withdraw funds from the RESP, it’s important to check the terms provided by your RESP promoter. In some cases, the authorization of both parents is needed to withdraw funds from the account, while in other situations, it isn’t necessary.
If the parents no longer wish to manage the RESP together, they can decide to close it and each subscribe to a separate RESP to which a portion of the funds will be transferred. This way, each parent will be able to continue to contribute to the plan to which he or she is subscribed and to manage the funds in the plan on his or her own.
Consult your RESP promoter to find out what conditions apply to your account and the steps to take to make this type of transfer.
If you can’t reach an agreement with your ex, you can ask the court to authorize this type of transfer.
Whatever decision you make concerning your child’s RESP, you should be aware that the money in a child’s RESP can sometimes be the subject of financial compensation upon divorce. This is the case, for example, when the funds invested in the RESP come from one spouse’s acquests, that is, property or money that must be divided with his or her ex upon divorce.
Furthermore, if one of the spouses has withdrawn money from the RESP, his or her ex may try to recover this amount through the division of the acquests.
Closing or maintaining the RESP: factors to consider
Before deciding whether to withdraw funds from the RESP, to keep it as is, or to continue making contributions to the plan, it's important to consider several factors. For example:
- penalties if you withdraw funds or stop making contributions,
- the RESP’s performance,
- your personal and family budget,
- your ability to cooperate with your ex to maintain the RESP,
- the potential impact on the amount of child support when your child reaches the age of majority.
Consult a financial advisor to select the option that best suits your needs.
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WARNING
The information presented on this page is not a legal opinion or legal advice. This page explains in a general way the law that applies in Quebec. To obtain a legal opinion or legal advice on your personal situation, consult a legal professional.
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