RESP   

 

 

Simple and profitable!

 

The Registered Education Savings Plan (RESP) is the most popular of the savings vehicles for children and is one of the best ways to invest in their future. It enables you to put money aside and have it grow on a tax-deferred basis until your children start their postsecondary education. Moreover, the government grants that are added to your contribution are equivalent to a return of at least 30%1. It’s a good way to give your children or grandchildren a helping hand!

MAIN FEATURES OF AN RESP

  • Your money grows on a tax-deferred basis until the beneficiary (usually your child or grandchild) withdraws it while attending a postsecondary institution. 
  •  The subscriber does not have to be related to the beneficiary. 
  • The plan does not entitle you to a tax deduction, but government grants will be paid into it automatically.

WHY OPEN AN ACCOUNT WITH FERIQUE?

TWO GRANTS

  • You may obtain from the federal government a grant equal to 20% of your contribution, to a maximum of $1,000 a year, in the form of the Canada Education Savings Grant (CESG).
  • If you are a resident of Quebec, you may obtain an additional grant equivalent to 10% of the net contributions made during the year, to a maximum of $250, in the form of the Quebec Education Savings Incentive (QESI).
  • Over the life of the plan, your CESG may reach a maximum of $7,200 and your QESI, a maximum of $3,600. All told, you may obtain as much as $10,800 in grants. This limit includes the total amounts for the Basic CESG and the Basic QESI as well as additional grants.

When should you start?

 

The sooner the better!

To open an RESP, you must provide the child’s social insurance numberApart from the substantial grants, the principle of the RESP is to let capital grow on a tax-deferred basis for as long as possible.

To obtain grants, the account must be established before the beneficiary turns 16 years of ageSince 1998, grant rights (unclaimed amounts of the Basic CESG) have accumulated for children until the end of the calendar year in which they reach the age of 17, even if no RESP has been opened in their name.

The rights to unused grants for the current year are deferred to the following year, provided that the child continues to be eligible.

Contributions

 

  • There is no annual limit on contributions to an RESP.
  • The annual contribution required to reach to the annual limit for the Basic CESG is $2,500.
  • Even though there is no annual contribution limit, you will receive the CESG only for the first $2,500 contributed to the RESP each year. Contributions over and above that amount are not eligible for the CESG for the current year or subsequent years.  
  • The lifetime contribution limit is $50,000.

 

Withdrawals

Once postsecondary studies begin, the beneficiary may start withdrawing money from the RESP each year.

  • The amounts withdrawn from the RESP as educational assistance payments are taxable in the hands of the student; but, because students generally have minimal income from other sources, the taxes payable – if any – should also be minimal.  
  • RESP withdrawals may be used for all education-related expenses, such as housing and food, and not just for tuition fees.  

 

What if the beneficiary does not pursue a postsecondary education?

  • You may wait for a certain period to see whether the beneficiary changes his or her mind. RESPs may remain open for a maximum of 35 years. If you are sure the beneficiary will not use the money, you may transfer it from one RESP to another.
  • If the RESP has to be closed, the money received in the form of the CESG or the Canada Learning Bond (CLB) must be repaid to the government. 
  • Personal contributions will be returned to the person who opened the plan. 
  • The accumulated interest on personal contributions, as well as on government grants or bonds, will be remitted to you if certain conditions are respected.

RESP: INDIVIDUAL PLAN OR FAMILY PLAN?


  INDIVIDUAL RESP FAMILY RESP
BENEFICIAIRIES A single beneficiary who does not have to be related to the subscriber One or more beneficiaries who are related to the subscriber by blood or adoption  
AGE LIMIT No age limit

Beneficiaries must be under the age of 31

ALLOCATION AMONG BENEFICIARIES

Contributions, withdrawals and educational assistance payments are related to a single beneficiary

Contributions are allocated among the beneficiaries by the subscriber  
IF THE BENEFICIARY DOES NOT PURSUE A POSTSECONDARY EDUCATION A new beneficiary may be designated
The other beneficiaries may benefit from the contributions

contact us

Advisory ServicesFERIQUE Investment Services
Monday to Friday 8 a.m. to 8 p.m.
T 514-788-6485
Toll free 1-800-291-0337
client@ferique.com


1 When you contribute to an RESP, you are entitled to a federal grant (the Canada Education Savings Grant, or CESG) equivalent to 20% of the amount contributed, to a maximum of $500 a year with a lifetime limit of $7,200. In addition, Quebec residents are entitled to a Quebec government grant (the Quebec Education Savings Initiative, or QESI) equivalent to 10% of the amount contributed, to a maximum of $250 a year with a lifetime limit of $3,600.