What Happens to an RESP for Your Grandchildren When You Die?

Why grandparents should consider opening an RESP

Registered Education Savings Plans (RESPs) are one of the most effective ways to save for a child’s or grandchild’s post-secondary education. The federal government provides matching grants for eligible contributions, investment growth within the plan is tax-deferred, and withdrawals used for qualified education expenses are typically taxed in the student’s hands at a low rate. RESPs can be used for many kinds of post-secondary training and education.

Grandparents often choose to fund RESPs as a meaningful way to support their grandchildren and to help their own children manage education costs. Rather than giving occasional gifts, contributing to an RESP can create a lasting benefit that grows over time and leverages government grants.

On a personal note, my mother set up an RESP for my children. When she passed away, I was able to take over the account—so this question is one I’ve considered both professionally and within my family.

Who can open an RESP?

Anyone can act as the subscriber and open an RESP for a beneficiary. In practice, parents and grandparents most often open plans for minor children. As long as you have your grandchild’s Social Insurance Number (SIN), you can open an RESP for them. The SIN is required by the financial institution to register the beneficiary and to apply for government grants and bonds, and it ensures the beneficiary’s grant entitlements are tracked correctly so there’s no duplication of government support.

Can you have multiple RESP accounts?

Yes. A single beneficiary can be named in more than one RESP. For example, a grandparent and a parent can each open separate RESPs for the same child, and grandparents on both sides of a family could maintain individual accounts for the same grandchild. Separated or divorced parents can also have multiple RESPs or arrange to split an existing RESP, and some financial institutions permit joint subscribers.

When more than one RESP exists for the same beneficiary, it’s important for the subscribers to coordinate contributions to maximize grant eligibility and avoid overcontributing. Excess contributions are subject to a penalty tax of 1% per month. There is a lifetime contribution limit of $50,000 per beneficiary across all RESPs, which is an important factor to weigh when deciding whether to open an account in your own name.

How long can an RESP stay open?

An RESP can remain open for up to 35 years from the date it was opened, although many plans are closed earlier. Contributions can be made for up to 31 years after the plan is established, and government grants apply only while the beneficiary is under age 18. There is an exception for beneficiaries who qualify for the disability tax credit: in those cases, a specified plan may remain open for up to 40 years from the account opening.

Have you named a successor subscriber?

One practical way to ensure continuity is to name a successor subscriber—some financial institutions allow you to designate someone who will take over the RESP if you die. You can also name a successor subscriber in your will. The most common choice is a parent of the beneficiary (your child), since they will likely be involved with the student’s education decisions and RESP use.

If no successor is appointed or if continuity is not addressed, the RESP could be collapsed when the subscriber dies. In that event, the original contributions can generally be withdrawn tax-free, but government grants must be repaid. Any investment growth accumulated in the plan would be taxable to the subscriber’s estate and could incur an additional penalty tax (often referenced as 20% in the context of certain RESP wind-ups). There may also be estate administration costs and probate fees to consider.

Deciding whether to open an RESP in your name

Contributing to a grandchild’s RESP is a generous and effective form of support, but there are important practical considerations if you plan to be the account holder. If you open the RESP in your own name, coordinate with other subscribers to maximize grants and avoid exceeding contribution limits. Appoint a successor subscriber through your financial institution or in your will to prevent disruption, and make sure your estate plan addresses the RESP.

An alternative approach is to gift funds to your child and have them open or contribute to the RESP in their name. That keeps the family’s education savings consolidated under the parent’s account and avoids some of the complications that can arise if the subscriber passes away before the beneficiary uses the funds.

For many families, keeping a grandparent-owned RESP separate also has sentimental value—my late mother’s RESP remains distinct from my own children’s account, in part so my children can see that their Nana continued to support them even after she passed.

Read more about RESPs:

• RESPs 101: RESP withdrawal rules
• The benefits and flexibility of family RESPs
• When and how to transfer an RESP for grandchildren
• Six ways Canadians can invest in an RESP on a tight budget