What happens with RESPs in a divorce or separation?

Divorce or separation can be a challenging time for families. It's important to consider the impact on your child's future, including their education savings. Registered Education Savings Plans (RESPs) are valuable tools parents use to save for their child's post-secondary education.  

Types of RESPs 

In the event of a divorce or separation, it's crucial to understand the type of RESP you have and how it may be affected: 

Joint RESPs 

If you and your former partner have a joint RESP, you’ll typically divide the funds between you. You can agree on this division through negotiation, mediation, or by a court order. You can then transfer the funds to individual or new joint RESPs or one parent may get the RESP to use for your child's education expenses. 

Individual RESPs 

If each of you has an individual RESP for your child, the funds in these accounts will generally remain with the parent who owns the account. However, it's essential you consider the overall division of assets and ensure you adequately account for your child's education savings during this process. 

Division of contributions 

When it comes to contributions made to your RESP during a divorce or separation, consider the following: 

Joint contributions 

If both of you have made contributions to the RESP, it's important to determine how you’ll divide the funds. You can base this division on proportional shares or negotiate it with your former partner. Or it can also be determined by a court order. 

Individual contributions 

If only one of you has contributed to the RESP, that person will typically keep ownership of the funds in their individual RESP account. However, it's essential you consider the overall division of assets and ensure you account for your child's education savings in the settlement process. 

Government grants 

RESPs are eligible for government grants. You should understand how your divorce or separation may affect these grants: 

Canada Education Savings Grant (CESG) 

The CESG is a matching grant provided by the government. It matches 20% of annual RESP contributions, up to a maximum grant of $500 per year. In the case of divorce or separation, the CESG is generally allocated based on the contributions made by each parent. If only one of you has contributed to the RESP, that parent will receive the corresponding CESG. If both of you have contributed, the CESG may be divided based on the proportion of each of your contributions. 

Provincial grants and additional grants 

Different provinces offer their own grants. These may have specific rules on how a divorce or separation affects them. You should consult with an advisor or an RESP provider to understand the implications and ensure you maximize the available grants for your child's education. 

Communication and agreement 

Help protect your child’s education savings by communicating openly with your former partner and reaching an agreement with them: 

Discussion and agreement 

Engage in open and honest discussions with your former partner about the division of assets, including the RESP. Clearly communicate your intentions and expectations for the funds and work towards a mutually agreeable solution. 

Seek professional advice 

You can contact me for help, but you should also consider seeking guidance from a family lawyer experienced in divorce and separation matters. They can provide valuable insights, help navigate the legal and financial complexities, and help you protect your child's education savings. 

Protecting your child's education savings 

Follow these practical steps to help provide certainty and avoid issues with your child's education savings during your divorce or separation: 

Maintain regular contributions 

Evaluate your financial circumstances and determine if you can continue making regular contributions to your RESP. If you save consistently, even during challenging times, you can help grow your child's education fund.

Create a legal agreement 

Consider establishing a legal agreement, such as a separation agreement, that clearly outlines how you’ll divide your assets, including your child’s RESP. This agreement will provide clarity, protect both of your and help properly account for your child's education savings. 

What happens to an RESP if your child doesn’t go to school?  

If your child decides not to pursue post-secondary education, you can still use the funds in the RESP for other purposes. Check out this article about what to do with an RESP if your child doesn’t go to college or university to learn more.

What's next? 

• Take the time to review your RESP account and understand its terms and conditions. 
• Consider consulting a family lawyer who specializes in divorce or separation matters. 
• Regardless of a divorce or separation, prioritize your child’s education. 
   

Contact me to discuss your next financial planning steps.