Section 7 of the Child Support Guidelines provides the details of the children’s special or extraordinary expenses which are shared by the parents proportionate to their respective incomes after deducting the contribution, if any, from the child. Here is a legal question: is Registered Education Savings Plan (RESP) a Section 7 expense? The simple answer is that RESP is not a Section 7 expense, the details of this answer are discussed in the coming paragraphs.
Applicable Legal Principles
In the following, we shall discuss legal principles regarding section 7: special or extraordinary expenses.
Definition of Special or Extraordinary Expenses
Section 7 (1.1) of the Child Support Guidelines defines extraordinary expenses as follows:
(a) expenses that exceed those that the spouse requesting an amount for the extraordinary expenses can reasonably cover, taking into account that spouse’s income and the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate; or
(b) where paragraph (a) is not applicable, expenses that the court considers are extraordinary taking into account
(i) the amount of the expense in relation to the income of the spouse requesting the amount, including the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate,
(ii) the nature and number of the educational programs and extracurricular activities,
(iii) any special needs and talents of the child or children,
(iv) the overall cost of the programs and activities, and
(v) any other similar factor that the court considers relevant.
Section 7 (1) provides that in a child support order the court may, on either spouse’s request, provide for an amount to cover all or any portion of the following expenses, which expenses may be estimated, taking into account the necessity of the expense in relation to the child’s best interests and the reasonableness of the expense in relation to the means of the spouses and those of the child and to the family’s spending pattern prior to the separation:
(a) child care expenses incurred as a result of the employment, illness, disability or education or training for employment of the spouse who has the majority of parenting time;
(b) that portion of the medical and dental insurance premiums attributable to the child;
(c) health-related expenses that exceed insurance reimbursement by at least $100 annually, including orthodontic treatment, professional counselling provided by a psychologist, social worker, psychiatrist or any other person, physiotherapy, occupational therapy, speech therapy and prescription drugs, hearing aids, glasses and contact lenses;
(d) extraordinary expenses for primary or secondary school education or for any other educational programs that meet the child’s particular needs;
(e) expenses for post-secondary education; and
(f) extraordinary expenses for extracurricular activities.
Analysis Regarding RESP
The courts have found that RESP is not a Section 7 expense and parents cannot be compelled to contribute to RESP account unless there is an agreement between the spouses. The courts have considered RESPs as investments and assets owned by one parent or both and describe them a savings or investments for anticipated post-secondary education costs for their children. However, contributions to RESP remain the property of the respective parent until the parent(s) direct the payment of such RESP to the child or beneficiary.
What Will Happen to RESP if the Child Does Not Attend Post-Secondary Education?
The Income Tax Act provides a number of mechanisms to deal with this issue. For instance, RESP funds may be transferred to the respective parent/owner of RESP, excluding any grants paid by the government and such grants are returned to the government.
Can a Parent Withdraw from RESP?
Yes, the parent who is a subscriber of RESP can any time withdraw from RESP funds, but such a parent cannot withdraw any grant contributed by the government. If RESP is jointly held by the spouses, in case of separation, spouses may divide RESP funds through an agreement or a court order. However, the amount of the RESP funds transferred is not included in the income of the recipient’s spouse.
Does RESP Become Part of the Estate?
If the subscriber of RESP dies, such RESP funds become part of the deceased’s estate, and such RESP funds are considered for estate planning.
The bottom line is that RESP is not a section expense and it is considered an asset or investment of the respective parent who has the power to withdraw or utilize it for his/her purposes unless an agreement or a court stops him/her from using it.
If you need help with your Divorce or Family Law matter, please contact IQBAL LAW and we have the skills and experience to handle your family law proceedings.