The 2023 Federal Budget means changes to RESP rules for separated/divorced couples.
Divorced or separated parents can now open a joint RESP. But is this a good idea?
At present, only spouses or common-law partners can open a joint RESP. Parents who opened a joint RESP before their divorce or separation can maintain this plan afterwards but cannot open a new joint RESP.
Budget 2023 proposes to enable divorced or separated parents to open joint RESPs for one or more of their children or to move an existing joint RESP to another promoter.
What is the impact on separated families?
1) This makes moving a joint RESP to another institution a little easier…
2) There is an opportunity to set up a new joint RESP post-separation and have your agreement stipulate the rules of contribution and redemption. If held jointly, maximizing grants can easily be established vs sharing grants with the possibility of missing out if one parent cannot afford the contributions.
Maximum grants are achieved with a $2500 annual contribution providing a $500 grant. This amounts to $3000 per year per child per year, which can be invested until the child goes to university. If a separated couple agrees to contribute to the RESP, they may choose a proportionate share based on income and ensure these funds are used for education for their children.
Jennie Weeks is a Chartered Divorce Financial Specialist in Vancouver, BC.
