16 June 1994 External T.I. 9413185 - RESP CLAIMS AGAINST, BANKRUPT CONTRIBUTOR

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:		can creditors claim an RESP of a bankrupt?

Position TAKEN: Not a taxation question. Provided comments on what rights a contributor and beneficiary may have.

Reasons FOR POSITION: Routine points of tax law on RESPs.

XXXXXXXXXX		7-941318

Attention: XXXXXXXXXX

June 16, 1994

Dear Sirs:

Re: Bankruptcy claims on Registered Education Savings Plans ("RESPs")

This is in reply to your letter of April 8, 1994, in which you asked to what extent a creditor may make claims against an RESP upon a Bankruptcy assignment. We presume the bankruptcy you are considering is that of the subscriber of the RESP.

There are no provisions in the Income Tax Act (the "Act") relating to the assignment of RESPs on a contributor's bankruptcy. Accordingly, it is not a question that we can provide an answer but is, instead, a question upon which you may wish to seek advice from your legal counsel.

While we can not specifically reply to your question, we note that in general, a subscriber to an RESP may, depending on the terms of a plan, have two properties with respect to the RESP which could fall to his or her estate on bankruptcy. These are the right to a refund of payments as defined under paragraph 146.1(1)(e) of the Act and the right to name the beneficiaries under the plan. The first of these, the right to a refund of payments, may, subject to the terms of a plan, be assigned by a subscriber at any time. The second right, however, may never be assigned as a condition for the registration of the plan.

If a subscriber is also a beneficiary of an RESP, the subscriber may also have rights to educational assistance payments in accordance with the terms of the plan and we would expect that these could also be assigned on bankruptcy. However, you may wish to seek the advise of your legal counsel in this respect.

The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate