RESP’s and the Canada Education Savings Grant
To open RESP, a SIN is required for both the subscriber, AND the beneficiary (child). For more information on obtaining a SIN, please go to www.servicecanada.gc.ca. If your household income is less than $75,769 also apply for the Canada Child Tax Benefit (CCTB).
Three types of RESP’s: Individual, Family and Group- Individual: One beneficiary
- Beneficiary does not have to be related by blood to subscriber
- Contributions may be made for 22 years after plan initiated
- Family: One or more beneficiaries
- Beneficiaries must be connected to subscriber by blood or adoption
- Contributions can only be made until beneficiaries are 21 years old
- If one beneficiary does not go to university, assets transfer to other beneficiaries
Features of an RESP:- RESP’s can stay open for a total of 26 years.• Lifetime contribution limit is $50,000 per beneficiary (no annual limits)
- CESG will only pay on the first $2,500 of contribution per year
- Subscriber can withdrawal contributions at any time, tax-free (may affect CESG)
- Accumulated Income Payments (capital gains, interest, dividends) may be withdrawn if:
- Children in plan are at least 21 years old and not going to post-education
- You are Canadian resident
- RESP plan was opened at least 10 years ago
- Will be taxed as interest income, at your Marginal Tax Rate, PLUS 20%
- If beneficiary does not continue education past high school, contributions returned (tax-free) and income earned is taxed (or may be transferred to RRSP tax-free, up to $50,000). CESG returned to the government.
Canada Education Savings Grant (CESG)- Paid by Human Resources and Development Canada. Paid directly to the RESP
- Grant is 20% of annual contributions, to an annual limit of $500
- Available to children up to and including 17 years of age
- Bonus amount paid for households with qualified income
- 20% extra for households with net income up to $37,178
- 10% extra for households with net income between $37,178 and $74,357
- Lifetime maximum grant per beneficiary is $7,200.