Family members, especially grandparents, often gift RESP contributions to the children in their families. It’s such an easy way to make a real difference in their lives. But be warned: gratitude may not be immediate. To receive immediate gratitude, we suggest you stick to your plan to buy the latest Xbox, Playstation or battery-operated toy. Here’s a cheat-sheet on some RESP facts:
The Registered Education Savings Plan (RESP)
An RESP is a government-registered savings plan that helps you save for a child’s post-secondary education. Both provincial and federal governments can add to your savings with education grants. Plus, your savings grow tax-deferred until withdrawn.
How it works
- CESG: The Canadian Education Savings Grant (CESG) is a federal grant that matches 20% of annual contributions to a maximum of $500 per year and $7,200 lifetime limit per child.
- QESI: The Quebec Education Savings Incentive (QESI) is equal to 10% of your annual RESP contribution – up to a maximum of $250 per year.
HollisWealth® offers both types of RESP plans
- Individual RESPs – can be used when the subscribers (clients) are not directly related to the beneficiary(s), for example aunts and uncles. One beneficiary is permitted.
- Family RESPs – can be used when the subscribers (clients) are the parents, grandparents or legal guardians of the beneficiary(s). One or multiple beneficiaries are permitted. Joint accounts are permitted.
What you get: Tax deferred growth
You can contribute up to $50,000 per child and there are no taxes payable on the money earned in an RESP until it’s withdrawn. Once enrolled in a post-secondary institution, the student can withdraw RESP grants and earnings at the student’s generally low tax rate. Withdrawal of principal has no tax implications.
What you need: SIN
All that’s needed is that the child have a Social Insurance Number (SIN). So as soon as the newest addition to your family arrives, remind parents to apply for one.
Please visit these links for more specifics, or, for answers to any questions specific to your situation, please never hesitate to send us an email or give us a call.