What is an RESP?
A Registered Education Savings Plan is a type of savings account that grows tax free until a child is ready for post-secondary education. RESPs are a good way to save for a number of reasons:
- the money grows tax free until the child needs it for tuition, residence and other educational expenses
- an RESP allows you to apply for the Canada Education Savings Grant on your child's behalf
- you may contribute up to $4,000/calendar year/child in an RESP
What types of RESPs are available?
Non-Family RESP
These plans can only have one beneficiary. There are no restrictions on who can be a beneficiary under these plans. The beneficiary does not have to be related to the subscriber, and can be over 21 when named. Contributions to this plan can be made up to 22 years after the plan is established.
Family RESP
These plans can have one or more beneficiaries. However, each beneficiary must be connected by blood or adoption to each living subscriber under the plan or have been connected to a deceased original subscriber, and be under 21 when named. Please note that contributions to this plan can be made until a beneficiary turns 21.
Group RESP
Group plans are operated on a pooling principle where the beneficiary named under a contract by a subscriber will receive Educational Assistance Payments when enrolled in a qualifying program but if the beneficiary fails to qualify for payment, the earnings are distributed among other beneficiaries of the same age who do qualify. Contributions to a Group plan are calculated by the Foundation’s actuary. In most group plans, the client has the option to opt out to a more flexible single plan at maturity.
