What is the RESP?

What is the RESP?

 
One way to invest in your child's future is a Registered Education Savings Plan (RESP). It helps create education capital to help them pay for their post-secondary education.

By opening an RESP, you benefit from attractive government grants, plus the amounts invested in the RESP will be tax-sheltered as long as they remain there. The Canada Education Savings Grant (CESG) allows you to receive a minimum of 20% of the annual amount invested. Depending on family income [Note 1], this grant can represent up to 40% of the first $ 500 contributed annually. In addition, eligible families may be entitled to the Canada Learning Bond (CLB) without any required contribution from them. They receive an initial amount of $ 500 the first year an RESP is opened and, thereafter, $ 100 for each year the family remains eligible, up to a maximum of $ 2,000 [Note 2].

In addition, some provinces offer additional RESP incentives. For more details on provincial programs, we invite you to visit the Government of Canada site External link. Opens in a new window.

Who can open an RESP?

A parent, grandparent or friend can open an RESP. He then becomes the subscriber of the RESP and the designated child the beneficiary. They must have a social insurance number and be a Canadian resident. It is possible to have several subscribers for the same beneficiary child.

An individual RESP can be purchased by anyone. The subscriber who decides to set up an individual RESP can designate a beneficiary with or without a family tie.

A family RESP must have a blood related or adopted child as a beneficiary. These could be your children, your spouse's children, or your grandchildren (including adopted grandchildren).

Cumulative contributions per subscriber are limited to $ 50,000 per child. However, there is no limit to annual contributions.

How do I withdraw the money from my RESP?

When the beneficiary begins their post-secondary studies, Educational Assistance Payments (EAPs) are gradually paid to them through the RESP. EAPs are made up of grants and income generated on the money invested in the RESP. They are taxable in the student's name and will therefore be added to their income if they work while studying. Note that the invested capital always belongs to the subscriber and is never taxable, regardless of the reason for the withdrawal.

EAPs are paid when the child is enrolled in a qualifying post-secondary program of at least three weeks, whether full-time or part-time.

What if my child does not pursue post-secondary education?

Among other things, you can name another beneficiary. If the new beneficiary is the child's brother or sister, the grants may be retained, subject to certain rules being observed.
In the absence of a new beneficiary, the grants are refunded to the government and the contributions are returned to the subscriber.
You can transfer the income generated in the RESP to your personal RRSP, subject to certain conditions. In this case, the subsidies will have to be repaid.