The original subscriber can minimize (and likely eliminate) that possibility by appointing a testamentary trust as the successor subscriber. The trust holds the RESP and the trustee must follow the directions established by the trust terms.
The trustee of the testamentary trust could be the person the original subscriber would have appointed as successor subscriber. In many situations, the trustee would also be the person the original subscriber appoints as executor of the will in which the trust is created.
If the original subscriber wishes, the will can direct the executor to use general estate funds to contribute to the RESP before it is transferred into the testamentary trust in order to reach the $50,000 contribution limit. The executor would not (personally) become the successor subscriber, because the contribution comes from estate funds, not from the executor’s personal funds.
The testamentary trust holding the RESP would, subject to any contrary provisions in the RESP contract, likely include trustee directions such as:
*to administer the RESP and invest its assets for the benefit of the beneficiary(ies) until the beneficiary(ies) are eligible for Educational Assistance Payments (EAPs);
*to add or change a beneficiary as the trustee considers appropriate and if allowed by law;
*to direct EAPs and to use refunds of contributions to assist financially with the post-secondary education of an eligible RESP beneficiary, at the times, in the amounts, and in the manner that the trustee considers appropriate;
*to maximize use of CESGs when making EAPs;
*to wind up the trust when all RESP assets are depleted or, if there are remaining assets, to only wind up the trust when:
*the post-secondary education of the RESP beneficiary(ies) is complete;
*the maximum life of the plan, as specified by law, has been reached; or
*all the RESP beneficiaries have died;
*if an RESP beneficiary is the beneficiary (or can qualify as a beneficiary) of a Registered Disability Savings Plan (RDSP), if the conditions for a rollover of RESP investment growth are met, and if the conditions for an AIP are met, to transfer, on a tax-deferred rollover basis, as much of the investment growth realized from the RESP contributions and CESGs as the trustee considers appropriate to a RDSP for that beneficiary;
*to distribute all unused RESP contributions and, if the conditions for an AIP are met, the after-tax investment growth realized from those contributions and from the CESGs (to the extent that no rollover to a RDSP is made), to specified individuals (which may include an RESP beneficiary) or charities.
Appointing a successor subscriber in the will of the original subscriber will likely ensure that the goal of the original subscriber when the RESP* was established will be realized, even after the death of the original subscriber. If such an appointment is not made, it is likely that the personal representative of the original subscriber will, after the death of the original subscriber, have to terminate the RESP in order to obtain the portion of the RESP assets that belong to the estate of the original subscriber, and the goal of the original subscriber will be frustrated.
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