RESPs When Moving to the United States

Families leaving Canada for the United States should carefully consider what happens to an existing Registered Education Savings Plan (RESP).

Several important issues may arise:

• Making a Canadian resident, such as a grandparent, the subscriber may simplify administration.
• The Canada Education Savings Grant is only available while the beneficiary is a resident of Canada.
• CESG amounts already received may generally remain in the RESP.
• Income may continue accumulating inside the RESP without Canadian tax.
• The United States does not provide the same tax-deferred treatment for an RESP.
• Income earned in the RESP while the holder is a U.S. resident may therefore be subject to U.S. tax.
• Complex IRS reporting requirements may apply.
• Failure to comply with U.S. reporting obligations can result in substantial penalties.
• State income tax rules may create additional considerations.

Action: Families moving to the United States should review both Canadian and U.S. tax consequences before deciding whether maintaining the RESP remains appropriate.