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Registered Education Savings Plans (RESP)

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Registered Education Savings Plan (RESP): A RESP is a dedicated savings plan to help you save for the cost of a child’s education after high school. Most RESP's are opened for children, but you can open an RESP for yourself or another adult. The person who opens the plan is called the subscriber.

When your child enrolls in post-secondary education, they can start taking payments, called Educational Assistance Payments (EAPs) from their RESP. EAPs are made up of the investment earnings and government grant money in the RESP. The person who is named to receive EAPs under the plan is called the beneficiary.

Some things to know about RESPs;

- Your savings grow tax-deferred. There is no tax on the investment earnings, as long as they stay in the plan.

- If you save for a child age 17 and under, the federal government also puts money into the RESP as a Grant & BondIn some provinces, the provincial government may contribute too.

- Grants for children under 17 are a maximum lifetime grant of $7,200 or $500/year

- You may backdate up 1 year per year

- You can usually put money in whenever you want, up to a lifetime maximum of $50,000 per child. But some plans require set monthly or annual contributions.

- The contributions are not tax deductible. But you can withdraw them tax free from the plan at any time for any reason although you will be required to repay the government grant.

- Your child can take money out of the RESP when they enrol in university or college or another qualifying education program or specified education program.

- An RESP can stay open for up to 36 years. Under specified plan rules, the plan can stay open for up to 40 years for beneficiaries eligible for the disability tax credit.

- Proceeds on the RESP upon withdrawal are taxed in the beneficiaries name. Only the government grants and investment growth is considered taxable income. The original contributions are not taxed.

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