Registered Education Savings Plan (RESP) Vulnerable to Creditors – Unlike RRSPs

When you set aside money for your children through an RESP you should do so with the knowledge that the funds you deposit into the RESP are vulnerable to creditors.  A RESP is not a trust and, unlike an RRSP or a trust, the assets held in the RESP do not meet the definition of trust property as contemplated by the Bankruptcy and Insolvency Act (Canada) and are therefore not creditor-proof.  A trustee-in-bankruptcy of a parent can collapse an RESP maintained by the parent for his children.  If this happens, not only may creditors realize against the RESP assets but any government money in the plan is lost on the collapse of the plan.

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