22 September 2000 External T.I. 2000-0040505 - EFFECT OF DEATH OF SUBSCRIBER ON RESP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: What happens to an RESP when the subscriber dies?

Position: Can't provide an answer.

Reasons: What happens after death will depend on the terms of the RESP contract and provincial law.

Canada Education Savings Grant Program (CESG)
Human Resources Development Canada
170 Hotel de Ville, 8th Floor 2000-004050
Jos Montferrand Building S.E. Thomson
Hull QC J8X 4C2

Attention: Anna Gravelle, Information & Services

September 22, 2000

Dear Ms. Gravelle:

Re: Effect of Death of Subscriber on a Registered Education Savings Plan (RESP)

This is in reply to your fax of August 3, 2000 in which you ask what happens to an RESP when a subscriber dies.

Upon the death of a subscriber to an RESP, the terms of the RESP and the relevant provincial law will determine what happens to the RESP. Consequently, the applicable provisions of the Income Tax Act (the "Act") will depend on the terms of the RESP contract and the provincial law.

Paragraph 146.1(2)(a) of the Act provides an RESP will not be registered unless it contains the condition that the property of any trust governed by an RESP must be irrevocably held for any of the following purposes:

• the payment of educational assistance payments*,
• the payment after 1997 of accumulated income payments*,
• the refund of payments*,
• the repayment of the Canada Education Savings Grant
• the payment to a designated educational institution (paragraph (a) of that definition in subsection 118.6(1) of the Act) in Canada, or
• the payment to another RESP.

(* The above terms are defined in subsection 146.1(1) of the Act.)

The terms of the RESP may provide that a new subscriber may continue to make contributions to the plan after the death of the original subscriber. The term "subscriber" in subsection 146.1(1) of the Act includes, "after the death of a subscriber under the plan, any other person (including the estate of the subscriber) who makes contributions into the plan in respect of a beneficiary". Whether or not contributions by a new subscriber are made to the RESP, the property of the RESP must nevertheless continue to be irrevocably held for any of the purposes listed above.

The Act does not specify the method by which a successor subscriber must be determined, except, as noted above, by including as a "subscriber", any person who makes a contribution to the plan after the death of a subscriber.

The term "beneficiary" is defined in subsection 146.1(1) of the Act to mean "a person, designated by a subscriber, to whom or on whose behalf an educational assistance payment under the plan is agreed to be paid if the person qualifies under the plan". To emphasize, the beneficiary must be designated by the subscriber. As noted above, a subscriber will include any other person who makes contributions into the plan after the death of a subscriber.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate

cc: Marthe Sasseville, Registered Plans Division
Gary Allen, Registered Plans Division