Principal Issues: [TaxInterpretations translation] Can a testamentary trust be a subscriber to an RESP after the death of the original subscriber?
Position: Yes
Reasons: A trust is an individual under subsection 104(2) and a person. The trust can then be a subscriber pursuant to paragraph (c) of the definition of subscriber in subsection 146.1(1).
XXXXXXXXXX 2005-011889 Michel Lambert CA, M.Fisc. August 3, 2005
Dear Madam,
Subject: Death of the Subscriber
Registered Education Savings Plan
This is in response to your fax dated March 1, 2005, in which you asked whether paragraph (c) of the definition of subscriber in subsection 146.1(1) allows for the transfer of a registered education savings plan (RESP) to a testamentary trust. The trust would then be the new subscriber to the RESP and would be able to contribute to the RESP.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
You presented us with the following situation:
Under the terms of his will, a taxpayer devised and bequeathed his entire real and personal property in trust for the benefit of his two-year-old child. At the time of his death, the taxpayer was a subscriber to an RESP of which the child was beneficiary. According to the taxpayer's will and following the settlement of his estate, the RESP would be transferred to the trust created for the benefit of his child.
Our Opinion
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is our practice not to issue a written opinion regarding proposed transactions otherwise than by advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may not, however, apply to your particular situation in certain circumstances.
For RESP purposes, a subscriber at any time includes each individual, other than a trust (the "original subscriber") who has subscribed to the plan with the promoter and, after the death of that individual, any other person (including the estate of the original subscriber) who acquires the individual's rights as a subscriber to the plan or who makes contributions to the plan on behalf of a beneficiary.
Section 104(2) provides that for the purposes of the Act, a trust is deemed to be an individual in respect of the trust property. An individual is also a person for the purposes of the Act.
Consequently, we are of the view that if a trust acquires rights from the original subscriber after the original subscriber’s death as a subscriber to the plan, or if a testamentary trust makes contributions to the RESP after the death of the original subscriber, that trust will be a subscriber within the meaning of that term in subsection 146.1(1).
The question of whether the transfer of an RESP to a testamentary trust is permissible appears to us to be a matter of civil law or common law and not of the Act. Consequently, we express no opinion on this issue.
As stated in Information Circular 70-6R5, this opinion is not an advance income tax ruling and is not binding.
Best regards,
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Directorate General for Policy and Planning