Registered Education Savings Plan
A Registered Education Savings Plan (RESP) is a tax-sheltered plan that helps you to save for a child’s post-secondary education. An RESP combines flexibility, tax deferred investment growth and government assistance to help reach education savings goals.
An RESP can be designed for any beneficiary – this includes children, grandchildren, nieces, nephews or family friends. The subscriber designates the beneficiaries for whom the funds are to be saved for post-secondary education. Beneficiaries must be Canadian residents and have a Social Insurance Number in order to set up the plan.
A subscriber can contribute any amount to an RESP on a monthly or annual basis. The lifetime maximum contribution limit is $50,000 per beneficiary. RESP contributions are not tax deductible, but the investment earnings on RESP contributions are tax deferred. When the plan earnings are withdrawn to cover the qualifying post-secondary education expenses, they are taxable to the beneficiary, not to the subscriber.
There are two qualifying types of RESP plan: an individual plan and a family plan.
- Individual Plan
An individual plan is intended to pay for the education of one beneficiary. Any person can open an individual plan and contribute to it. A minimum deposit is typically not required. If the named beneficiary chooses not to pursue post-secondary education you may be able to name a new beneficiary.
- Family Plan
A family plan includes more than one beneficiary but each beneficiary must be related to the subscriber of the plan. Examples: children, grandchildren, brothers and sisters. All beneficiaries must be under the age of 21 when they are named. A minimum deposit is typically not required. The contribution limit remains $50,000 per beneficiary. At time of withdrawal the subscriber chooses how to divide the funds among the beneficiaries – if one beneficiary chooses not to pursue post-secondary education the other beneficiaries can still use the money in the RESP.