RESP Beneficiary Designation vs. Gifting in a Will: What’s the Best Option in Nova Scotia?

When planning for the transfer of a Registered Education Savings Plan (RESP) in Nova Scotia, the decision between designating a beneficiary or gifting the RESP through a will can significantly impact the process, speed, and cost of transferring the funds. Here’s a closer look at both options. Note this article provides legal information, not legal advice. Reading this article should not be construed as obtaining legal advice from Ross Estate Law.

Designating a Beneficiary for the RESP

Designating a beneficiary directly on the RESP is often the preferred option. This process provides several advantages:

• Bypassing Probate: Upon the plan holder’s death, the RESP funds are transferred directly to the beneficiary, bypassing the probate process. This can save time and money, as probate can be costly and time-consuming.

• Protection from Creditors: The funds in the RESP will not be part of the deceased’s estate and are not subject to claims from creditors. This offers a layer of financial protection for the beneficiary.

• Simplicity and Efficiency: With a beneficiary designation, the transfer of funds is typically straightforward. A key case supporting this approach is Fitzgerald Estate v. Fitzgerald, where the court affirmed that designated beneficiaries of accounts like TFSAs receive the proceeds upon the account holder's death without delays or complications. This same principle applies to RESPs, simplifying the process significantly.

Gifting the RESP in a Will

Alternatively, you can choose to gift the RESP through your will, specifying who should receive the funds. However, this method comes with several important considerations:

• Probate Process: Gifting an RESP via a will means that the funds are included as part of the deceased’s estate. As a result, they will be subject to probate, which can delay the transfer and add extra costs.

• Debts and Liabilities: Since the RESP is part of the estate, it may also be vulnerable to claims from creditors, which could reduce the amount ultimately available to the intended beneficiary.

• Flexibility: One benefit of gifting the RESP through a will is the flexibility it provides. You can change the beneficiary at any time by simply updating the will. However, this flexibility comes at the cost of potential delays and additional legal steps when the estate is processed.

Which Option Is Better?

Generally, designating a beneficiary for the RESP is the more efficient and cost-effective option. It allows for the direct transfer of funds, bypasses probate, and provides creditor protection for the beneficiary. On the other hand, gifting the RESP in a will may be considered if you want the flexibility to change beneficiaries but must be mindful of the potential probate delays and costs.

In conclusion, unless you specifically need the flexibility offered by a will, designating a beneficiary for your RESP is typically the better choice for ensuring a smooth and prompt transfer of funds.

Please note that the information provided in this blog post is for general informational purposes only and is not intended as legal advice. Reading this post does not create an attorney-client relationship, and the information shared here should not be relied upon as a substitute for professional legal counsel. If you require personalized legal advice regarding estate planning or any related matters, we encourage you to schedule a consultation with Ross Estate Law to discuss your unique circumstances.

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