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RESP and Discount Brokerages

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[OP]
Deal Addict
Mar 30, 2009
1074 posts
554 upvotes

RESP and Discount Brokerages

I've been looking into transfering my RESP which currently only holds mutual funds to a discount brokerage. Setting up an RESP with both parents as subscribers seems like such an obvious thing to do that I was shocked to find that RBC's discount brokerage only allows for just one subscriber for an RESP account. Needless to say, I'm not going to go with RBC. Does anyone know of any other discount brokerage that has such a rule?
28 replies
Deal Fanatic
Jul 1, 2007
8521 posts
1678 upvotes
No, and I don't believe RBC Direct Investing has such a rule... who told you that it does?
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
[OP]
Deal Addict
Mar 30, 2009
1074 posts
554 upvotes
I.was told by someone who worked at an RBC branch. She called RBC DI and was told that they only allowed one subscriber. The other spouse could be given trading authority only.
Sr. Member
Oct 14, 2012
801 posts
540 upvotes
Woodstock
I'd check further. Just Live Chat with RBC DI. Eeks. You're right. That's what the Live Chat person said too!

At BMO InvestorLine you can definitely have joint subscribers to a RESP. My husband and I just opened one a few weeks ago.
CIBC Investor's Edge has no annual fee for a RESP, if that's of any interest. I don't know whether they use Joint subscribers or not.
Deal Fanatic
Mar 24, 2008
6237 posts
2698 upvotes
Toronto
Thalo wrote: No, and I don't believe RBC Direct Investing has such a rule... who told you that it does?
RBC DI only allows one subscriber, I can confirm that. What's the 'benefit' of having joint subscribers?
Deal Expert
User avatar
Nov 15, 2004
20268 posts
4087 upvotes
Toronto
ksgill wrote: RBC DI only allows one subscriber, I can confirm that. What's the 'benefit' of having joint subscribers?
All contributions made to an RESP become sole property of the subscriber(s). If there's only one subscriber and two contributors there's nothing stopping the subscriber from unilaterally running off with the contributions (less whatever penalty is charged by the company) and leaving both the other contributor and the kid high and dry since all the grants would be returned and very little income would be left. Joint subscribers can only be removed in cases of death, divorce, or a transfer that they both consent to.

OP, if you're looking into a self-directed brokerage make sure they have agreements to offer all of the grants. The additional CESG and CLB are dependent on income, so if you have enough funds to invest in such a brokerage you'd probably not qualify, but if you do then you'll miss out on them if your only RESP is with a company that isn't eligible to administer them.
Deal Addict
Sep 7, 2010
1335 posts
129 upvotes
Calgary
Piro21 wrote: All contributions made to an RESP become sole property of the subscriber(s). If there's only one subscriber and two contributors there's nothing stopping the subscriber from unilaterally running off with the contributions (less whatever penalty is charged by the company) and leaving both the other contributor and the kid high and dry since all the grants would be returned and very little income would be left. Joint subscribers can only be removed in cases of death, divorce, or a transfer that they both consent to.
I think the OP is the subscriber, so I don't think he/she is too worried about himself running off with the money lol.
Sr. Member
Oct 14, 2012
801 posts
540 upvotes
Woodstock
A more horrible but still worth considering scenario is if the sole subscriber dies before the kids finish university. Unless the subscriber's will is set up properly, the RESP can get collapsed, the CESG must be given back to the government, and the funds could have to be given to creditors looking for money from the deceased and then any balance remaining would go to the estate's beneficiaries who are not necessarily the children. The RESP contributions would also be subject to probate fees/taxes. If there are joint subscribers so long as the other subscriber is still alive none of that happens.
Details: http://www.thebluntbeancounter.com/2013 ... ntury.html
Deal Addict
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Oct 14, 2001
1727 posts
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GMA
Just so you know, both TD DI and Questrade allow for joint-subscribers. I like QT since there are no account maintenance fees and ETF purchases are also free.

My RESP problem is that I wanted to open an account for my 5 nephews and nieces (they're all brothers and sisters) and it's not possible to open a family plan if you're not related by blood (uncles and aunts are excluded) so the only option would be to open 5 individual accounts. What a mess that would be.
Deal Fanatic
Mar 24, 2008
6237 posts
2698 upvotes
Toronto
Piro21 wrote: All contributions made to an RESP become sole property of the subscriber(s). If there's only one subscriber and two contributors there's nothing stopping the subscriber from unilaterally running off with the contributions (less whatever penalty is charged by the company) and leaving both the other contributor and the kid high and dry since all the grants would be returned and very little income would be left. Joint subscribers can only be removed in cases of death, divorce, or a transfer that they both consent to.
...
Why would a sole subsriber run away with the money if it wasn't for divorce? It is just pure fear mongering as far as I am concerned... what's stopping one from taking money out of a HELOC and running away? This is hardly a reason to opt for a joint subscriber-ship.
Deal Fanatic
Mar 24, 2008
6237 posts
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Toronto
BetCrooks wrote: A more horrible but still worth considering scenario is if the sole subscriber dies before the kids finish university. Unless the subscriber's will is set up properly, the RESP can get collapsed, the CESG must be given back to the government, and the funds could have to be given to creditors looking for money from the deceased and then any balance remaining would go to the estate's beneficiaries who are not necessarily the children. The RESP contributions would also be subject to probate fees/taxes. If there are joint subscribers so long as the other subscriber is still alive none of that happens.
Details: http://www.thebluntbeancounter.com/2013 ... ntury.html
This reason makes sense. Will has been set up to handle such a scenario and there is no creditors involved :D
Deal Fanatic
Jul 1, 2007
8521 posts
1678 upvotes
Most SDRESPs allow joint subscribers. I'm still in disbelief that RBC DI doesn't, but I'll take your words for it. The benefit is exactly as mentioned, the survivorship of the joint subscriber, so that the RESP isn't collapsed upon the death of one of them.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Deal Fanatic
Mar 24, 2008
6237 posts
2698 upvotes
Toronto
Thalo wrote: Most SDRESPs allow joint subscribers. I'm still in disbelief that RBC DI doesn't, but I'll take your words for it. The benefit is exactly as mentioned, the survivorship of the joint subscriber, so that the RESP isn't collapsed upon the death of one of them.
I can't believe that they'll collapse the plan upon death of the subscriber. I also didn't believe that RBC DI wouldn't allow joint subscribers but they said that was the only option available.

I might as well move mine to Questrade to avoid this mess and save a few bucks on commission fees.
[OP]
Deal Addict
Mar 30, 2009
1074 posts
554 upvotes
There's also the situation where the beneficiary may not go on to pursue post-secondary education. In that case, you may want to do an RRSP rollover of the earnings in the plan. The RRSP rollover is only possible if the subscriber has sufficient room for the full amount of the earnings. The risk that the subscriber does not have the room is minimized with two subscribers. The RRSP rollover is important to avoid the 20% penalty that would otherwise be levied on the earnings.

Although all the benefits related to joint subscribers address somewhat unlikely events, the risks are easily minimized through the use of joint subscribers. It's mind-boggling that the discount brokerage owned by the nation's largest bank would choose to not offer the option to its clients.
Deal Fanatic
Mar 24, 2008
6237 posts
2698 upvotes
Toronto
frugal1 wrote: There's also the situation where the beneficiary may not go on to pursue post-secondary education. In that case, you may want to do an RRSP rollover of the earnings in the plan. The RRSP rollover is only possible if the subscriber has sufficient room for the full amount of the earnings. The risk that the subscriber does not have the room is minimized with two subscribers. The RRSP rollover is important to avoid the 20% penalty that would otherwise be levied on the earnings.

Although all the benefits related to joint subscribers address somewhat unlikely events, the risks are easily minimized through the use of joint subscribers. iI's mind-boggling that the discount brokerage owned by the nation's largest bank would choose to not offer the option to its clients.
Sold! Although, just a technicality, the 20% 'penalty' is the grants that Government gave you to begin with.
Sr. Member
Oct 14, 2012
801 posts
540 upvotes
Woodstock
@ksgill unfortunately no the 20% penalty is in addition to the CESG grants. For e.g. if no one goes to higher ed,
the subscribers can take back the original contributions with no tax or penalty;
then they have to give back the CESGs;
then there remains the money earned by investing the contributions and the CESGs--that money if withdrawn is taxable income to the subscriber AND there is a surtax of an additional 20% applied to it. So if you're in the 46.5% tax bracket, that money could be taxed at 66.5%.
However, if one of the subscribers has any RRSP contribution room, they can rollover the investment earnings tax-free and surtax-free into the RRSP.

Of course all of our kids will go to some kind of further education, apprenticeships, trades, universities or colleges so we don't really need to worry about the 20% penalty!
Deal Fanatic
Mar 24, 2008
6237 posts
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Toronto
BetCrooks wrote: @ksgill unfortunately no the 20% penalty is in addition to the CESG grants. For e.g. if no one goes to higher ed,
the subscribers can take back the original contributions with no tax or penalty;
then they have to give back the CESGs
Betcrooks, you are a wealth of knowledge! Thanks for educating me on the topic. Thanked!

As far as I am concerned, if my kids don't get an education where they use the RESP, the govt. might as well charge me 20% on the *earned* amount since it would be a failure on every level especially now because an undergrad degree just gets you 'average' jobs.
Deal Addict
Jul 15, 2009
2514 posts
1701 upvotes
ksgill wrote: Betcrooks, you are a wealth of knowledge! Thanks for educating me on the topic. Thanked!

As far as I am concerned, if my kids don't get an education where they use the RESP, the govt. might as well charge me 20% on the *earned* amount since it would be a failure on every level especially now because an undergrad degree just gets you 'average' jobs.
They don't even need to complete an undergrad degree. They only need 13 weeks of post-secondary education in order to take all the money out.
Penalty Box
Dec 26, 2013
520 posts
167 upvotes
Ottawa
Just curious how RESP withdrawals work once a child has entered university/college? Do you need to submit receipts to the CRA, tuition, rent, books etc and then you are reimbursed?
Deal Fanatic
Mar 24, 2008
6237 posts
2698 upvotes
Toronto
wilyam wrote: Just curious how RESP withdrawals work once a child has entered university/college? Do you need to submit receipts to the CRA, tuition, rent, books etc and then you are reimbursed?
I believe you have to provide proof of enrollment etc. to the institution where you have your RESP. You don't have to send anything to CRA to get the money.

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