Should you include contributions to an RESP in your Separation Agreement?
When a separating couple opts to use a Separation Agreement to settle their affairs, they have the freedom to agree to almost all manner of issues that could arise. One such issue is the payment of their children’s post-secondary education by way of contributions to an RESP. In this post, Daniel Duyvelshoff, a Fresh Legal intern from the University of Ottawa law school, highlights the advantages and disadvantages of including contribution requirements to RESPs in Separation Agreements.
What is an RESP?
A Registered Education Savings Plan, or RESP, is an investment that allows parents to save money for their child’s post-secondary education. It differs from a regular savings account because federal and provincial governments can supplement parental contributions through grants and incentives.
Why include RESP contributions in a Separation Agreement?
Including contribution requirements in a Separation Agreement provides two important advantages. First and foremost, it respects the principle of the best interests of the child by helping to cover costs with post-secondary education. When a child grows up and is ready for university or college, the burdens of tuition, textbooks, and all the many fees associated can be somewhat lifted. This allows the child to just focus on their education.
The second advantage is perceived fairness: By stipulating exactly what each spouse will contribute in a Separation Agreement, each spouse may be satisfied that they and their ex are paying their share for their child. Each spouse also knows they are benefiting equally from government grants, without the headache of coordinating contributions to individual RESPs with their spouse.
But be careful - it has its disadvantages too.
However, one must remember that circumstances can change. This leads to the first major disadvantage: What may seem fair now may not be the case years from now. Parents typically pay special and extraordinary expenses, including tuition, proportionally to their combined income. For example, if one parent makes $70,000 a year and the other makes $30,000 a year, the former would be responsible for 70% and the latter for 30% of the child’s post-secondary expenses. If a separating couple inputs specific contribution requirements in their Separation Agreement, proportionality may be overlooked.
Secondly, an important consideration for contribution requirements are the enforceability of the clauses. In the court’s eyes, these contributions do not properly fall under child support obligations as they do not provide for the current needs of the children. This means, regardless of the parties’ intentions, the court may not force a non-contributing parent to make payments.
Finally, sharing a joint account with your former spouse can be problematic. Although an RESP is intended for your children’s use, either spouse might withdraw money for any reason or make changes to the account unless appropriate safeguards are put in place.
With these advantages and disadvantages in mind, separating couples should carefully consider whether including contributions to an RESP in an agreement will meet their needs. While Separation Agreements provide freedom for separating couples to manage their affairs in whatever way they see fit, including RESP contribution requirements may only cause unnecessary headaches.