Saving for your children’s post-secondary schooling is a very important financial decisions for parents to make. Upon having children, many couples opt to open an RESP (Registered Education Savings Plan) or order to manage these funds and prepare for the high costs of post-secondary education. If you and your partners are separating, it is a good idea to discuss what you will do with your RESPs to ensure your children still benefit from these funds.
How Are RESPs Used For Children's Education After A Divorce
Most commonly, parties include a clause in their Separation Agreement stating that they will use the funds in their RESP towards the children’s education and living expenses while they pursue post-secondary education in their first degree. But, in the event that these funds are not sufficient to cover the Children’s post-secondary expenses then the parties will share the children’s post-secondary educational expenses as agreed between them, having regard to the financial circumstances of the parties at the time, the availability of other sources of funding such as student loans, scholarships and the children’s ability to contribute to their own education. However, if the children do not attend post-secondary, this can cause some issues of what to do with the funds in the RESP.
What If Children Do Not Attend Post-Secondary Education
If funds in an RESP are not used for the children's education, for whatever reason, the RESP may be closed and the funds from the plan will be returned to the plan contributors or the beneficiaries. Income earned on the contributions are taxable in the hands of the contributor. Unused Government contributions and income earned on those contributions go back to the Government. It is also important to note that RESPs can remain open for 35 years, so if you are unsure about your child’s future at the time of divorce, you do have some flexibility. You may also add beneficiaries in the future should you have another child.
Case Law Regarding RESPs in Canada
Generally, in Alberta the case law indicates that RESPs are not Family Property and should be treated more as funds held in trust for the beneficiaries. As such, it is common to see any remaining balance left in the RESP after the children graduate post-secondary be divided between the beneficiaries such as the result in Delorme v Delorme, 2017 ABQB 699. With respect to utilizing the available RESP funds, the recent case, VLG v WAJ, 2020 ABQB 105 states that, “any payments for tuition, books and supplies (including computer equipment if needed) shall be made firstly from the RESPS so as to maximize withdrawals and then shall be shared by the parties equally, pending the results of the special chambers application”. It is obvious from the case law that RESPs are for the benefit of the child and should not be regarded as property during divorce negotiations.
If you are going through a divorce and need assistance with property division, our skilled mediators can help. Connect with us today to book your 30-minute free consultation.
Covid-19 has had a substantial impact on many family’s financial resources. With a multitude of people losing their jobs or working reduced hours, the income that many were used to has been either greatly reduced or eliminated all together. This can be extremely stressful, especially during a separation and divorce as parties are no longer sharing resources and are generally living on one income. It may become difficult for some individuals to pay or collect spousal support during this time. However, ones need for financial support continues as every day life goes on and financial needs must be met. If you need assistance resolving issues of spousal support you and the other party can attend mediation which would mean you would not need to attend court. However, if you cannot reach a resolution in mediation you may need to contact a lawyer to assist in obtaining an interim support order. Read on to find out how to apply for an interim support order.
Interim applications for spousal support are treated differently during the resolution process than at trial. This is because parties may still be in the process of dealing with their disclosure including income information and property division. An interim order means that the court order will be in effect until further agreement between the parties or a final court order is pronounced by a judge or justice. As such, the courts will focus more on the means and needs of each party with a focus on their current situation, when finalizing an interim order. If you are struggling financially due to Covid-19 your lawyer may be able to assist in making an application for support or to vary a current support order.
Covid-19 has impacted the procedures for attending morning chambers as there is currently a focus on hearing only urgent or emergent issues. If your matter is deemed to be urgent, the following is an outline of the procedure for attending court.
The Applicant (the party seeking relief from the Court) is required to file an application and an affidavit. The application sets out the relief being sought and the grounds for seeking that relief. The affidavit is a document that is sworn or affirmed by the party seeking relief. It sets out all of the evidence in support of the relief sought.
If you or your counsel are served with an application, you have the option of filing a cross-application seeking relief of your own. In that case, the same three steps outlined above would also be applied to the cross-application.
Please be advised that anytime an affidavit is sworn the party that swore the affidavit is subject to being cross examined on the document. That is, questioned under oath/affirmation by the opposing lawyer with a court reporter transcribing everything that is said. As such, there may be questioning scheduled and you may be cross examined on your Affidavit, just as we may wish to cross examine the other party.
At the chambers hearing, both counsel will have a brief 10-minute opportunity to relay the relevant facts to the Justice and argue the merits of the case. The Justice will render a decision after both counsel have made their submissions. Ultimately, a Court Order will be generated in accordance with the decision rendered by the Justice. You will be provided with a filed copy of that document.
If you would like to speak with a lawyer with respect to an interim support application, connect with us today.