RESP is a type of savings account that enables a contributor to accumulate assets on behalf of a beneficiary on a tax deferral basis, to pay for the beneficiary's post secondary education. Besides tax free money growth, RESPs are also eligible for the Canada Education Savings Grant, of at least 20 cents for every dollar on the first $2000 of annual RESP contributions. The amount of grant may be higher, depending on your family income. The maximum amount parents, grandparents, relatives or friends may contribute in an RESP is a combined total of $4000 per year per beneficiary and a lifetime limit of $42,000.

Two most common types of RESPs are family and non-family RESPs. Family RESPs can have one or more beneficiaries and each beneficiary must be related to subscribers either by blood or adoption, and must be under age of 21 when named. Contributions to this plan can be made until a beneficiary turns 21. Non-family RESP can have only one beneficiary who does not have to be related to subscribers. The beneficiary can be over 21 when named and subscribers can contribute for up to 22 years after a non-family plan has been opened. An RESP must be terminated by the end of the 26th year.†

The money in an RESP grows tax-free until the beneficiary enrolls full-time in a qualifying program at a college, university or other recognized post-secondary educational institution and starts using Educational Assistance Payments from the RESP. If the beneficiary does not pursue post secondary education, another beneficiary can be named instead. However, in order for the new beneficiary to keep the Canadian Education Savings Grant, the new beneficiary has to be a brother or sister of the former beneficiary or has to be related to the subscriber, provided that both the new and old beneficiaries are under 21 years of age. Also, subscribers may roll over income from the RESP into their Registered Retirement Savings Plans, under certain conditions.

Our team of experienced financial services representatives will be happy to answer any questions that you have and help you choose the most appropriate investments for an RESP, based on your needs and priorities.

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