Registered Education Savings Plan (RESP)

Secure your child's academic future with tax-efficient, government-supported savings. A Registered Education Savings Plan (RESP) is a powerful, tax-advantaged investment tool designed to help Canadian families save for a child’s post-secondary education. Administered under the Income Tax Act and supported by both federal and provincial governments, RESPs provide tax-deferred investment growth and access to substantial government grants. What Is an RESP? An RESP is a contract between an individual (the subscriber) and a financial institution (the promoter) to save for a named beneficiary’s education. Contributions are not tax-deductible; however, earnings within the plan grow tax-free until funds are withdrawn. In addition to personal savings, the government offers incentives such as the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB). Who Is Eligible? Beneficiary (Student):

• Must be a resident of Canada and have a valid Social Insurance Number (SIN).
• Can be a child, grandchild, or any named individual.
• Multiple RESPs can be opened for the same beneficiary, but all contributions across plans must not exceed the $50,000 lifetime limit.

Subscriber (Account Holder):

• Anyone can open and contribute to an RESP, including:
  • Parents or legal guardians
  • Grandparents
  • Aunts, uncles, other relatives, or family friends

Types of RESPs

Type of Plan	Description
Individual Plan	One beneficiary. The beneficiary does not need to be related to the subscriber.
Family Plan	Multiple beneficiaries allowed. Must be related to the subscriber by blood or adoption.
Group Plan	Contributions are pooled with those of other investors. Structured and often less flexible.

Government Incentives

• Canada Education Savings Grant (CESG)
• Matches 20% of annual contributions up to $2,500 per year.
• Maximum grant: $500/year, $7,200 lifetime per child.
• Additional CESG available for lower-income families (up to an extra 20%).

• Canada Learning Bond (CLB)
• For children born after 2003 in low-income families.
• Up to $2,000 per eligible child with no personal contributions required.

Provincial Grants

• Some provinces (e.g., Quebec, British Columbia) offer additional funding.
• Speak to an advisor for region-specific benefits.

How to Open an RESP Step 1: Determine Plan Type Select between an individual, family, or group RESP based on your financial goals and relationship to the beneficiary. Step 2: Provide Documentation

• Social Insurance Numbers (SIN) for subscriber and beneficiary
• Valid identification and address verification

Step 3: Choose an Investment Strategy RESPs can hold a variety of qualified investments, including:

• Mutual funds
• Segregated funds
• GICs and bonds
• ETFs and savings accounts

Step 4: Begin Contributions

• No annual contribution limit, but subject to a $50,000 lifetime cap per beneficiary.
• Contributions can be made monthly, annually, or in lump sums.

Withdrawing Funds from an RESP Withdrawals are categorized as:

• Educational Assistance Payments (EAPs)
• Comprise investment income and government grants.
• Taxable in the beneficiary’s hands, often resulting in little or no tax due to low student income.
• Must be enrolled in a qualifying post-secondary program.
• Refund of Contributions (ROC)
• Represents your original contributions.
• Non-taxable when withdrawn.
• Can be returned to the subscriber or used to fund future withdrawals.
• Accumulated Income Payments (AIPs)
• If the beneficiary doesn’t pursue education, income in the RESP can be withdrawn by the subscriber under strict conditions.
• Subject to regular income tax plus an additional 20% tax (12% in Quebec).
• May be transferred tax-free to your RRSP (up to $50,000) if you have available contribution room.

What If the Beneficiary Doesn’t Pursue Post-Secondary Education? You have several flexible options:

Option	Description
Change Beneficiary	Replace with a sibling or related child (for family plans).
Transfer to RRSP	Up to $50,000 if eligible RRSP room is available.
Withdraw Contributions	Tax-free; however, government grants must be repaid.
Close the Plan	Must be closed by the end of the 35th year after the plan is opened.

Compliance & Tax Considerations

• RESP earnings are tax-sheltered until withdrawn.
• CESG and CLB must be repaid if the beneficiary does not attend a qualified program.
• All RESP transactions should be coordinated with a licensed advisor to ensure compliance with CRA and grant rules.