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What an RESP is for
An RESP (Registered Education Savings Plan) is a savings plan registered with the Canada Revenue Agency to help pay for education after high school: university, college, a trade school or another qualifying program, full-time or part-time.
Three things make it worth using. The government adds grants, starting with the Canada Education Savings Grant (CESG) of 20% on what you contribute. Growth isn't taxed while it stays in the plan. And when the student takes out grants and growth for school, that money is taxed as the student's income, and students often owe little or no tax while they study.
Your own contributions aren't tax-deductible, but you can take them back without tax. Each child has a $50,000 lifetime contribution limit across all of their RESPs, with no yearly limit. Going over the limit costs 1% a month on the excess for as long as it stays in the plan.
Who does what: subscriber, beneficiary and promoter
The subscriber opens and owns the RESP. They contribute, choose the provider and request withdrawals. Apart from family plans, almost anyone can be a subscriber: parents, grandparents, other relatives, family friends, or an adult saving for themselves. Two people can be joint subscribers only if they're spouses or common-law partners, or former partners who are both the child's legal parents.
The beneficiary is the student the money is for. To be named, their Social Insurance Number must be given to the provider and they must live in Canada. The beneficiary doesn't control the plan, but grants and growth are paid to them as Educational Assistance Payments (EAPs) when they're in school.
The promoter is the official word for the provider: the bank, credit union, brokerage, robo-advisor or scholarship-plan dealer that holds the RESP and applies for the grants. For the income-tested benefits, the Additional CESG and the Canada Learning Bond, the provider also needs details of the child's primary caregiver, who may not be the subscriber.
Individual, family and group plans
An individual plan has one beneficiary, who doesn't have to be related to you. You can even open one for yourself.
A family plan can name more than one beneficiary, but each must be connected by blood or adoption to each living subscriber, and be under 21 when added. Its main advantage is flexibility: if one child doesn't go to school, the CESG can be shared with a sibling who still has CESG room. The Canada Learning Bond can't be shared.
A group plan, sold by scholarship-plan dealers, pools your money with other families whose children are the same age. You usually have to contribute on a set schedule, and sales fees usually come out of your early contributions. If you leave after the first 60 days, you get your contributions back minus fees, but the earnings stay with the group and the grants go back to the government. Read the prospectus before you sign.
Exemple concret
Maya's parents open a family RESP as joint subscribers, with Maya as the beneficiary. When her brother is born two years later, they add him to the same plan. If one of them doesn't go on to school, the CESG paid for them can be shared with the other, as long as the other still has CESG room.
Vérifiez vos connaissances
Choisissez une réponse pour savoir si elle est juste.
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Voir la réponse
Réponse : The subscriber. The subscriber opens the plan, contributes and requests withdrawals. The child is the beneficiary.
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Voir la réponse
Réponse : $50,000 across all of their RESPs. Each child can have $50,000 contributed in total, across every RESP. $7,200 is the lifetime CESG limit.
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Voir la réponse
Réponse : A family plan. In a family plan, the CESG can be shared with a sibling who still has CESG room.
À vous de jouer
Write down the subscriber, beneficiary, and possible provider for your own situation. Flag any family-plan or grandparent questions before choosing a provider.
- Write down who will be the subscriber: one person, or two spouses or partners.
- List each child you're saving for and check that each has a Social Insurance Number.
- Choose between an individual plan for each child or one family plan for siblings.
- Note any questions about grandparents, step-children or group plans to ask a provider.