RESPs

RESPs

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Contributions made to an RESP grow tax free until the funds are withdrawn to pay when the beneficiary is registered at a qualifying educational program.

The Basics

To open an RESP, you will need the child’s Social Insurance Number. At the time the RESP is opened, the child must be a resident of Canada.

There are two types of RESPs, individual and family. An individual RESP can be opened by anyone for anyone. A family RESP can be opened by parents or grandparents of the children and can be withdrawn in the name of any beneficiary named to the plan.

Key terms

  • Beneficiary: The student using the RESP for their post-secondary education
  • Subscriber: The person who opens an RESP on behalf of the beneficiary

Key facts

  • Contributions:
    • Lifetime contribution limit for each beneficiary (child) is $50,000. There is no annual limit.
    • If you cannot make a contribution in any given year, you may be able to catch up in future years – up to $5,000 if carry forward room is available
    • Contributions are not tax-deductible
  • All the money in an RESP grows tax-free until withdrawn and will be taxed in the hands of the beneficiary, who will typically have little income as a student and will likely pay minimal or no tax on the withdrawal
  • You can hold a variety of investments in an RESP, including mutual funds
  • The basic CESG provides 20 cents on every dollar you contribute, up to a maximum of $500 (20% of the first $2,500 of annual contributions per beneficiary) per year
    • $7,200 Lifetime CESG maximum per beneficiary
    • 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
  • Additional CESG available to lower income families
    • $600 For family income <$47,630: $500 (Basic CESG) + $100 (an additional 20% on the first $500 of annual contributions per beneficiary)
    • $550 For family income between $47,631 and $95,259: $500 (Basic CESG) + (an additional 10% on the first $500 of annual contributions per beneficiary)
  • CESG eligibility criteria:
    • Beneficiary and subscriber must have a valid SIN and be a Canadian resident
    • Contributions must be made before the end of the calendar year in which the beneficiary turns 17
    • Special rules apply to beneficiaries age 16 and 17
Dollar amounts are updated annually based in part on the rate of inflation.
  • Individual vs. Family plans
    • Choose a plan

      Individual RESP Family RESP
      There must be only one active beneficiary at all times You can name one or more beneficiaries
      You want to save for yourself or for a child who is or is not related to you All beneficiaries in the plan must be related to you by blood or adoption (i.e., children, grandchildren, siblings)
      The beneficiary can be named to the RESP at any age Beneficiary must be under age 21 to be added

      Contributions:

      Can be made for up to 31 years after the plan is started

      Remain the property of the subscriber*

      Can only be made for the current year, up to a lifetime limit of $50,000

      Contributions:

      Can be made for a beneficiary until age 31

      Remain the property of the subscriber*

      Can only be made for the current year, up to a lifetime limit of $50,000 per beneficiary

      Must be made in the name of a specific beneficiary

      Recommended for:

      Single-child families

      Families with large age differences between children

      Subscribers* who want to set up an RESP for themselves or someone they’re not related to

      Recommended for:

      Single-child families planning to have more children

      Families with more than one child or planning to have more than one child

      Families with more than one child as the government grants and income are shared by all beneficiaries in the plan**

      * A subscriber is the person opening an RESP and making contributions on behalf of a beneficiary
      **Additional CESG, CLB, BCTESG, QESI and SAGES can only be paid if all beneficiaries of the Family RESP are siblings.



  • Government Grants – Don't Leave Money on the Table
    • Canada Education Savings Grant (CESG)

      All RESPs are eligible for Basic CESG

      • The Basic CESG provides 20 cents on every dollar you contribute, up to a maximum of $500 (20% of the first $2,500 of annual contributions per beneficiary) per year
      • 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
      • $7,200 Lifetime CESG maximum per beneficiary
      • 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

       

      Additional CESG available to lower income families

      • $600 For family income <$47,630: $500 (Basic CESG) + $100 (an additional 20% on the first $500 of annual contributions per beneficiary)
      • $550 For family income between $47,631 and $95,259: $500 (Basic CESG) + (an additional 10% on the first $500 of annual contributions per beneficiary)

       

      CESG eligibility criteria:

      • Beneficiary and subscriber must have a valid SIN and be a Canadian resident
      • Contributions must be made before the end of the calendar year in which the beneficiary turns 17
      • Special rules apply to beneficiaries age 16 and 17

       

      For complete CESG guidelines, visit Employment and Social Development Canada.

      Canada Learning Bond (CLB)

      Eligibility for the CLB is based, in part, on the number of qualified children and the adjusted income of the primary caregiver

      $500 initial bond plus $100 per eligible year up to age 15

      No contributions required

      $2,000 lifetime maximum per beneficiary

      Cannot be used by other beneficiaries in a Family Plan RESP

      Saskatchewan Advantage Grant for Education Savings (SAGES)

      NOTE: The Government of Saskatchewan has announced the temporary suspension of SAGES effective January 1, 2018.

      Until further notice:

      • SAGES matching funds will not be provided for contributions made after December 31, 2017.
      •  Retroactive SAGES will not be provided for any contributions made prior to January 1, 2018.
      • SAGES grant room will not accumulate for beneficiaries after December 31, 2017.


      Subscribers are encouraged to continue to submit applications for SAGES for beneficiaries resident in Saskatchewan to ensure a smooth transition once the suspension is lifted and SAGES payments restart. Existing SAGES amounts will remain invested and available for Education Assistance Payments to eligible beneficiaries and can be transferred to your RESP with AGF Investments.



      Grant of up to 10% of annual contributions made into an RESP

      Beneficiary must be a Saskatchewan resident 

      Maximum of $250 per child per year (and up to $500 if catch-up room is available)

      Lifetime maximum of $4,500 per beneficiary

      Retroactive to January 1, 2013

      SAGES paid into an RESP may be used by any beneficiary of the Family Plan RESP without a lifetime limit per beneficiary

      To apply for SAGES, subscribers must open an RESP for an eligible beneficiary with a participating SAGES promoter and complete the SAGES application form.

      For more information visit: Saskatchewan Education, Learning, and Child Care or Employment and Social Development Canada.

      Quebec Education Savings Incentive (QESI)

      Refundable tax credit paid directly into an RESP

      Available to Quebec residents under age 18

      Quebec government will match 10% of net annual contributions, up to $250 per year and up to $500 if catch-up room is available

      Lifetime maximum of $3,600 per year

      For low-income families, an increase of up to $50 per year per beneficiary may be added to the basic amount

      For more information, please refer to the Revenu Quebec site at:
      https://www.revenuquebec.ca/en/online-services/forms-and-publications/current-details/in-129-v/

      British Columbia Training and Education Savings Grant (BCTESG)

      $1,200 one-time grant per eligible beneficiary born on or after January 1, 2006

      When an eligible child turns six years old, the subscriber may be able to apply for the grant until the beneficiary turns nine years old 

      Beneficiary must be a BC resident (with a custodial parent or a legal guardian who is also a resident) at the time of the BCTESG application

      BCTESG paid into an RESP may be used by any beneficiary of the Family Plan RESP without a lifetime limit per beneficiary

      For more information visit British Columbia Education & Training or Employment and Social Development Canada

      Dollar amounts are updated annually based in part on the rate of inflation

      Reasons for not receiving grant/bond monies on contributions to an RESP

      Review your RESP statement transactions carefully to confirm government grant(s)/bond amounts received. Even if all the eligibility criteria has been met for the grant/bond in question, there are a number of reasons you may not have been paid the full amount owing on your contributions. These include:

      • Missing/incomplete grant/bond application form(s)
      • Missing/invalid beneficiary, subscriber and/or primary caregiver information or cases where this information does not match government records
      • Lifetime grant/bond or contribution limits have been exceeded
      • Grant/bond was paid to another RESP in the name of the same beneficiary
      • Annual contribution limit was exceeded for contributions made before 2007
      • Additional CESG, CLB, additional QESI, SAGES, and BCTESG are refused because not all beneficiaries in a Family RESP are siblings
      • Additional CESG is denied because a beneficiary has been tainted by a contribution withdrawal made for non-educational purposes
      • System/filing or administrative/processing errors

      Notify us immediately if you notice that you have not been paid the full grant/bond amount expected. Please note that if the error is not corrected within 3 years of the contribution date, the government will not pay the grant/bond money owing on the contribution in question.

      More information on RESPs and grant/bond eligibility criteria can be found at Student Financial Assistance.

  • What You Need to Know about Withdrawals
    • There are two types of withdrawal options

      1. Educational Assistance Payment (EAP)
        • Consists of earnings or “accumulated income” plus the grants themselves
        • When withdrawn, the EAP is taxed in the hands of the beneficiary. A T4A tax slip is issued in the beneficiary’s name and must be included as income for the year that the beneficiary receives it.
        • Current proof of enrolment in a designated or certified post-secondary education program is required before a payment can be processed. 
      2. Post-Secondary Education (PSE) Withdrawal
        • Consists only of contributions (investment principal) in the RESP
        • Not taxed since contributions were made with after-tax dollars
        • Since the beneficiary is pursuing a post-secondary education, the subscriber may withdraw their contributions without repaying any grant amounts or paying any tax.

      RESP total account value

      Note: Both of the above withdrawals can only be made while a beneficiary is enrolled in a post-secondary educational program (and six months thereafter). Contact your local Service Canada or call Employment and Social Development Canada (ESDC) for questions regarding designated post-secondary institutions in Canada.

      There are no limitations on what the funds are used for.

      FAQs

      Q: Is there a limit on the amount of EAPs a beneficiary may receive?

      A: EAPs are limited to $5,000 before a beneficiary completes the first 13 consecutive weeks in a full-time qualifying educational program. Students requiring more than $5,000 in EAPs in the first 13 weeks require prior approval from the ESDC. Once the first 13 weeks is completed, the beneficiary can receive any additional amount of EAP. Part-time students are limited to $2,500 in each 13-week period of enrolment in a qualified post-secondary institution.

       

      Q: What documentation is required?

      A: AGF requires:

      1. A letter of direction (or AGF RESP Redemption Form) signed by the subscriber.
        The subscriber confirms the amount of the withdrawal and the proportion of EAP and PSE.
      2. Proof of enrolment is required for EAP and PSE redemptions for educational purposes only. The requirements pertain to all institutions – including both Canadian or foreign institutions.

       

      Q: What counts as proof of enrolment?

      A: The Federal Government (ESDC) provides the following guidance regarding proof of enrolment:

      "Before making EAPs, obtain proof that a beneficiary is enrolled in a program and institution that satisfies EAP criteria.  A document that provides the following information would generally be acceptable proof of enrolment for EAP purposes.

      • Beneficiary name
      • Post-secondary school name
      • Date when proof was issued.
      • Semester(s) or school year
      • Indication that beneficiary is enrolled full- or part-time."

       

      So when requesting an EAP or PSE withdrawal, please provide documentation with the following information:

      1. School is a Post-Secondary Institution.
      2. Letter Issued by Office of Registrar, or printed from school website with full name of school indicated.
      3. Student’s Full Name.
      4. Course start & end dates (Academic Year must be the current year or within past 6 months).
      5. Course description with credit hours or course type Full Time/Part Time is indicated.

      NOTE: can be in one document or a combination of multiple documents, including an invoice or receipt of payment for tuition, letters from the school indicating enrolment, timetable, T2202 or T2202A.

       

      Q: How are withdrawals made for educational purposes taxed?

      A: EAPs (consisting of grant and income) are always taxed in the hands of the beneficiary – generally beneficiaries are in a lower tax bracket than the subscriber. For more information, contact a tax specialist. PSEs are not taxable.

       

      Q: How much of the EAP is the CESG?

      A: The portion of the EAP attributable to the Canada Education Savings Grant (CESG) is based on the ratio of grants paid into the plan to total investment earnings in the RESP. CESGs are limited to $7,200 per beneficiary. This is important to keep track of in family plans, where the CESG money is shared among the beneficiaries. For more information, read the articles on the CESG and family plans

       

      Q: How many years can the beneficiary who attends a qualified post-secondary institution receive EAPs?

      A: According to the Income Tax Act (ITA), there are no specific restrictions on the number of years a beneficiary may attend post-secondary educational institution and receive EAPs. However, each RESP must be terminated no later than the 35th year after the year in which the original plan was opened. 

       

      Q: What if the beneficiary is not enrolled at the time of the withdrawal?

      A: Technically, a subscriber can choose to withdraw all their contributions and use them in any way – regardless of whether or not the beneficiary goes to school. However, if their contributions are withdrawn while the beneficiary is not eligible for an EAP, the grants received will be repaid to the government. 

  • What Happens to Unused RESP Money
    •  Unused RESP options include naming a new beneficiary, transferring it to your RRSP and getting your money back

      If the beneficiary does not immediately pursue a post-secondary education, the money invested in the RESP can continue to grow tax-sheltered. An RESP can remain open for 35 years.

      If the beneficiary decides not to pursue a post-secondary education, the subscriber has several options, including:

      1. Name a new beneficiary
        • In a Family Plan, contributions, earnings and grants are shared by all beneficiaries
        • To keep the CESG, the new beneficiary must be under 21 years of age and be a brother or sister of the former beneficiary
      2. Transfer assets to another eligible RESP
        • May be able to keep the government grants
      3. Transfer the accumulated income to an RRSP*
        • Up to $50,000 of earned income can be contributed into the subscriber’s regular or spousal RRSP – provided the subscriber/spouse has sufficient RRSP contribution room
        • Grants must be returned, but the growth is kept
      4. Withdraw the earnings with an Accumulated Income Payment*
        • If there are no other eligible alternative beneficiaries, the subscriber can also elect to receive the income earned on the money contributed to the RESP in the form of an Accumulated Income Payment (AIP)
        • Grants will be returned to the government when the first AIP is made, but growth is kept
        • AIPs are taxable income for the subscriber and are subject to the usual withholding tax rates for registered plans plus 20% additional tax (varies by province)
        • AIPs cannot be rolled into the beneficiary’s RRSP
      5. Transfer the earnings to a Registered Disability Savings Plan (RDSP)
        • Must have a beneficiary who is eligible for the Disability Tax Credit
        • Contributions must be made before the end of the year in which the beneficiary turns 59
        • The rollover is taxable at the time the disability assistance payment is made and cannot not cause total contributions to exceed $200,000
        • In addition, one of the following conditions must be met:
          • The beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent him/her from pursuing post-secondary education or
          • The RESP account has been in existence for at least 10 years and the beneficiary is at least 21 years of age and is not pursuing post-secondary education or
          • The RESP has been in existence for more than 35 years
      6. Withdraw the contributions
        • The money that was contributed to the RESP over the lifetime of the plan may be withdrawn and returned to the subscriber.
        • All grant incentives received that remain within the account at the time of the withdrawal will be returned to the federal and/or provincial governments.
        • Contributions withdrawn are not subject to any additional tax.
      7. Donate the earnings to an educational institution
        • Some RESPs, such as AGF's RESP, allows for the amount of earnings remaining in the RESP (i.e., whatever remains after eligible amounts have been transferred or converted) to be paid to a designated educational institution in Canada provided that:
          • The beneficiary is not eligible for an Education Assistance Payment (EAP)
          • Incentive(s) have been repaid, as required
          • The subscriber does not qualify for an AIP
        • All grant incentives received that remain within the account at the time of the withdrawal will be returned to the federal and/or provincial governments.
        • A payment to a Canadian designated educational institution would be a gift and not a donation so a tax receipt will not be issued to the subscriber or to the beneficiary

       

      * The following conditions must be met:
      › The RESP has been in existence for at least 10 years or the beneficiaries are deceased
      › All current and former beneficiaries must be at least 21 years old
      › All current and former beneficiaries are not pursuing post-secondary education
      › The subscriber is a resident of Canada

      The RESP account must be closed by the end of February of the following calendar year

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