2011 Federal Budget—RESPs: Asset Sharing Among Siblings

The federal Budget tabled on June 6, 2011 included no changes to the income tax measures originally announced in the Budget of March 22, 2011.

The Income Tax Act imposes a penalty tax that applies to over-contributions to registered education savings plans (“RESPs”). There is an exception that generally applies to transfers from one RESP to another RESP, where a beneficiary under the transferor plan is a sibling of a beneficiary under the transferee plan, provided that the beneficiary under the transferee plan is under 21 years of age. The budget proposes to extend the exception for such transfers between individual RESPs for siblings, provided that either the transferee plan allows more than one beneficiary under the plan, or the beneficiary of the transferee plan had not attained 21 years of age when the plan was entered into. The proposed change applies to transfers of property after 2010.