Help make your kids smarter. An RESP is a smart way to start.

Prepare for a child's future by starting to save for their education today. Registered Education Savings Plans (RESPs) are becoming as essential in saving for a child's education as RRSPs are for retirement.

An RESP lets you save money and watch it grow, tax-free, until the beneficiary is ready for post-secondary education.

RESPs at a glance

• An RESP is a  government-approved plan for the purpose of providing post-secondary education funding for a beneficiary
• You may contribute up to a maximum of $4,000 per beneficiary annually with a lifetime maximum of $42,000
• Earn an immediate return of 20% on contributions up to $2,000 a year with the Canada Education Savings Grant (CESG).  The maximum CESG is $400 per beneficiary annually with a lifetime maximum of $7,200.  You may carry forward unused CESG.
• RESPs can be either individual with one beneficiary, or a family plan with more than one beneficiary.  The beneficiaries of a Family Plan must be "blood related to the subscriber."
• There is no foreign content limit for  RESPs, unlike RRSPs, which have a 30% foreign content limit.
• Over-contribution are taxed at 1% per month until withdrawn.  The tax is payable within 90 days after the end of the year in which contributions are made.
• The deadline for contributions is December 31 (year-end)

THE CANADA EDUCATION SAVINGS GRANT (CESG)

The new Canada Education Savings Grant (CESG) allows eligible RESP beneficiaries to receive grant monies based on the annual contributions paid into the plan.

For example, a monthly contribution of $50 to an RESP along with CESG contributions for 15 years would earn $20,386, assuming an annual return of 8%.  Saving outside an RESP, assuming a marginal tax rate of 40%, would earn $13,085--a difference of over $7,300.  Your total contribution to the plan is $9,000.

The government will contribute 20% on the first $2,000 deposited annually into an RESP*. That is up to $400 per year to a lifetime maximum of $7,200 paid into the RESP by the Canadian government
*Some restrictions may apply

THE SUBSCRIBER

Only the registered owner (subscriber) can make contributions to their RESP.  The contributions are not tax deductible, rather they grow, tax free, until the beneficiary is ready for post-secondary education.
At the time of post-secondary education for the beneficiary, the subscriber chooses the amount of payments and when they can be withdrawn.  The monies can be used to cover tuition fees, textbooks, and room and board - all post-secondary expenses.

THE BENEFICIARY

All children under the age of 18* and resident in Canada automatically accumulate CESG contribution room.  All beneficiaries must have a social insurance number in order to receive the CESG.
*some restrictions apply for RESP beneficiaries aged 16-17

When the student draws on the RESP to fund a post-secondary education** the income and CESG portion of the investment becomes taxable to the beneficiary.  However, because students typically have little other income, they pay little or no tax on RESP income.
**Most Canadian post-secondary institutions and programs, including correspondence courses, qualify for the purpose of receiving RESP payments.  Certain foreign post-secondary institutions may qualitfy if they are more than 13 weeks in duration.

If the benficiary does not pursue a post-secondary education or if there are unused contributions
An RESP can exist for a maximum of 25 years.  If the beneficiary does not pursue a post-secondary education, another beneficiary can be designated.  If after 25 years the present beneficiary is not attending post-secondary school or, once the original beneficiary reaches the age of 21 and the plan has been in existence for 10 years, the subscriber can do one of the following:

• Transfer the income, penalty free, to their RRSP, provided they have contribution room (maximums apply); or
• Withdraw the income and pay tax at their regular marginal rate plus 20% additional tax.
• In both cases the original contributions are returned to the subscriber tax-free and the CESG component is returned to the government.

Contact us today for more details or to make an appointment with one of our Personal Bankers.

Phone 496-2000 or toll free 1-877-496-2151 or email