Special CESG rules for beneficiaries age 16 and 17

By: Sound Choices • August 8, 2018 • Personal Finance

RESP Series

A Registered Education Savings Plan (RESP) is a tax-sheltered plan registered with the Canada Revenue Agency (CRA) that can help families save for their children’s post-secondary education.

Contributions made to an RESP grow tax free until the funds are withdrawn to pay when the beneficiary is registered at a qualifying educational program.

 


 

RESP savings can be supplemented with government education savings initiatives, including the Canada Education Savings Grant (CESG). However, it's important to note that special CESG rules apply to beneficiaries age 16 and 17.

Key facts about the CESG
Eligibility
  • All RESPs are eligible for Basic Canada Education Savings Grant (CESG)
  • Beneficiary and subscriber must have a valid SIN and be a Canadian resident
Amount
  • The basic CESG matches 20% of the first $2,500 of annual contributions per beneficiary per year
  • Available until the end of the calendar year in which the child turns 17
Missed years
  • If you cannot make a contribution in any given year, you can carry over unused Basic CESG. By contributing more than $2,500 in subsequent years, you can get up to $1,000 of Basic CESG per calendar year if unused CESG amounts are available

Maximum

  • $7,200 Lifetime CESG maximum per beneficiary

Family plan

  • CESG paid into a Family Plan RESP may be used by any beneficiary of the RESP to a lifetime maximum of $7,200 per beneficiary

Special rules for beneficiaries aged 16 and 17

Beneficiaries who are turning 16 and 17 in the current calendar year are eligible for the CESG if one of two conditions is met:

  1. A minimum of $2,000 worth of contributions was made, and not withdrawn from an RESP, on behalf of the beneficiary before the end of the calendar year in which the beneficiary turned 15.
  2. A minimum of $100 in annual contributions was made, and not withdrawn from an RESP, in any four years (doesn't have to be consecutive) before the end of the calendar year in which the beneficiary turned 15.

Case study #1

My son was 17 when I opened a Family RESP for my two younger children last year. He was not named as a beneficiary at that time because we knew he would not be eligible for the Canada Education Savings Grant (CESG). Is it still possible to add him to the account and have him use the grant proceeds accumulated by his siblings?

A: He can still be added to the account as long as it is before his 21st birthday. He would have access to grant proceeds, as grant monies are shared in a Family RESP.


Case study #2

I want to open a Registered Education Savings Plan (RESP) for my 15-year-old daughter. She has previously never been a beneficiary under any RESP. Will she be eligible to receive grant money once the RESP is set up?

A: She is eligible to receive grant money on any contributions made in the year before the beginning of the year in which she turns 16. If the subscriber contributes $2,000 (and does not withdraw it) before the beginning of the year in which the beneficiary turns 16, the beneficiary will also be eligible to receive grants on any contributions made in the years she turns 16 and 17.


 

Ask your financial advisor today about how to get started with education savings, or visit AGF.com/RESP.

 

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.