A Registered Education Savings Plan (RESP) is one that you do not purchase for yourself, but for one or more beneficiaries. The RESP is devoted to covering post-secondary education-related expenses when your beneficiary pursues higher education.
Who Qualifies for RESP?
You can choose anyone to be your beneficiary. It can be your children, grandchildren, nieces, nephews, or those who are close to your family. There’s no limit to the number of beneficiaries you can have.
However, in order to qualify, a beneficiary must:
- Be a Canadian citizen
- Have a Social Insurance Number (SIN)
How Does RESP Build?
RESP funds accrue according to a combination of investments and individual contributions. However, there is a lifetime limit on the amount you can contribute to an RESP. You cannot put any more than $50,000 into a beneficiary’s RESP over the course of the plan’s lifetime.
You can contribute to this for up to 31 years, and the plan can remain open for 35 years.
What Is Available Within The RESP?
There are also grants and bonds available for those in special situations. However, these have their own eligibility requirements.
The first is the Canada Education Savings Grant (CESG). With this, the government matches the initial 20% of the $2,500 annual contribution to an RESP, which amounts to $500 per year. The government provides up to a total of $7,200 altogether. Only beneficiaries under 18 can qualify.
The Canada Learning Bond (CLB) is for children born after December 31, 2003, who come from families with modest incomes. The government makes an initial $500 payment, and then the payments come in installments of $100 annually until the child turns 15. The maximum payable amount per beneficiary is $2,000.
How Can My Beneficiary Use The RESP?
Once a beneficiary provides proof of enrollment in post-secondary education, he or she will receive the funds to cover education costs. If the payments consisted of grants and bonds, plus accumulated contributions, are known as Educational Assistance Payments (EAPs), and must be claimed on the student’s tax return.
If not used for educational purposes, the beneficiary can withdraw the funds tax-free, but anything remaining on the CESG must be repaid up to 20% of the amount that was withdrawn.
Get Started On Your RESP Today
FiduSure Financial is here to give you the means to provide your loved one with education without the financial hardship that follows. With our help, you’ll be able to ensure a brighter future for your loved ones years ahead of time. Call us today at (647) 567 4702 to learn more.