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All Your FAQs About RESPs

Who can open an RESP

Anyone. RESPs are typically used to save for a child’s education and can be opened by parents, guardians, grandparents, other relatives or friends (subscriber).

How much can I contribute

There is no annual contribution limit, however the following rules apply:

  • Canada Education Savings Grant (CESG) are only paid on the first $2,500 each year

  • Lifetime contribution limit is $50,000 per child

  • The maximum grant available is $7,200 per child

  • Contributions grow tax-free while inside the RESP

  • There is no tax deduction for making contributions

What is the Canada Education Savings Grant (CESG)

The CESG is a grant paid by the government and works out to 20% on the first $2,500 contribution per child each year up to the maximums mentioned above. However, if there is sufficient carry forward room on unused previous contributions, the grant will be paid on up to $5,000 worth of contributions each year.

There is also an additional CESG grant that the government may top up by an extra 10% or 20% on the first $500 of annual contributions. These additional grants are income tested and you can view the requirements on the governments website here.

A child is eligible to earn the CESG grant on contributions made up until the end of the year they turn 17.

Are there any other grants available

Yes, there is also a Canada Learning Bond that a child can earn over time in the RESP. This bond could be worth up to an additional $2,000 deposited into the child’s RESP. Please note, there is an eligibility requirement based on an income test. To see if you are eligible please refer to the Government of Canada site by clicking here.

Furthermore, there may be additional grants paid by certain provincial governments, you can learn more here.

How does a family plan work

There are two types of plans, individual and family. Obviously the individual plan is set up using one child as the beneficiary. On the other hand, a family plan can can have multiple beneficiaries, however they must be connected to the subscriber by either blood or adoption.

One of the main advantages of a family plan is more of the money can be allocated to certain children depending on education spending needs. However, each child is only eligible to receive the maximum $7,200 of available CESG in the form of EAPs.

How do I withdraw the money to pay for school

Once your child is enrolled in a qualifying post secondary education, you can begin to withdraw funds to pay for schooling. Here are the key rules you will need to know.

  • Withdrawals will be made in the form of education assistant payments (EAPs)

  • EAPs are made up of all grants and bonds received, plus investment earnings

  • EAPs are taxable in the hands of the student, which usually results in little to no tax being paid.

  • Contributions that were made over the life of the RESP will be withdrawn tax free

  • The only limit on withdrawals is in the first13 consecutive weeks of enrolment, during this time the EAP will be limited to $5000. If enrolment continues after, any available amount can then be withdrawn.

For more information on what qualifies as a post secondary education program click here.

What if my child does not continue with post secondary education

  1. You can leave an RESP open for up to 36 years. This provides you flexibility in the event your child decides to attend later in life.

  2. If it is a family plan, you may be able to use a certain amount or all of funds in the RESP to go towards the education of another child in the plan.

  3. You could transfer up to $50,000 tax free into your RRSP. Certain conditions apply including available RRSP room, RESP has been open for at least 10 years and all beneficiaries of the RESP are at least 21 and not continuing any post secondary education.

  4. You can close the plan and withdraw the funds. In this case you must payback all grants and may have to pay tax on the investment earnings. However, your contributions will be returned without paying tax.

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