RESP's

Registered Education Savings Plans (RESPs) are government approved plans designed to assist and encourage Canadians to save for post-secondary education. RESPs are not specific investments, but a vehicle used to hold a variety of investments and shelter them from taxes. Contributions to an RESP grow tax-free, but unlike RRSPs, they are not tax deductible.

RESP Facts

• There is no annual limit on the amount that can be contributed to an RESP. although the maximum lifetime contribution is $50,000 per child, based on $2,500 deposit. The Canada Education Savings Grant is capped at $500 per year per child with a lifetime maximum grant of $7,200.
   
• You can deposit up to $5,000 per year in order to pick up previous year's grants. Please call for details.
   
• For beneficiaries to received the CESG in the year in which they turn 16 and 17, you must ensure that one of the following two conditions has been met by the last business day of the year in which they turn 15:
  • A minimum of $2,000 in total contributions have been made for the beneficiary and not withdrawn; OR
  • A minimum of $100 in annual contributions have been made in any four previous years and not withdrawn.
     
• Contributions for a particular year must be made by December 31st or the last business day of the year.
   
• There are no foreign content rules for RESPs, although all investments must be in Canadian dollars.
   
• A Family Plan or a Single Plan may be opened. A Single Plan permits only one beneficiary per plan of any relationship. A Family Plan permits more than one beneficiary per plan, but all beneficiaries must be related to the subscriber by blood or adoption (i.e. parent and child or other descendants such as grandchild or great-grandchild, but not nieces or nephews), and the beneficiaries must be under 21 years old when named to the plan.
   
• You determine in which funds the RESP will be invested and you have the option of switching the holdings among any funds as your financial goals and time horizons change. You also have the flexibility to contribute in one lump sum or through a regular investment plan.

RESP FAQs

Q: What if my children don’t go to college or university?

Your RESP contributions and any growth will be returned to you and CESG payments must be returned to the government. You may transfer the RESP funds to your RRSP if there is contribution room. The lifetime limit on the amount that can be transferred is $50,000. Certain conditions may apply.

Q: What if I don’t make a contribution this year, do I lose the grant?

If an opportunity to receive a grant is missed due to not making a contribution, the entitlement to make up that missed opportunity will be carried forward to future years. This is called "unused grant room" and cal allows a beneficiary to receive a CESG of up to $1,000 in one year.

Q: How long can I contribute to an RESP?

In a Single Plan, contributions must stop at 31 years after the year of setup. In a Family Plan, contributions must stop when the beneficiary turns 31 or 31 years after the year of setup, whichever is earlier. CESG may be received up until the beneficiary turns 17, provided certain conditions are met by the last business day of the year in which the beneficiary turns 15. The plan must be closed 36 years after the plan is setup.

Q: How much does it cost to setup an RESP?

There is no trustee or administrative fees.

Q: Is there a minimum contribution?

No, but there is a minimum contribution of $50 per month for a pre-authorized chequing (PAC) plan.