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The Registered Education Savings Plan (RESP) is a tax-sheltered plan that can help you save for a child’s post-secondary education. With the high cost of education, many parents, grandparents and other family and friends are recognizing the need to save well before the expenses become a reality.
An RESP combines flexibility, tax-deferred investment growth and direct government assistance to help you reach your education savings goals for your children.
Opening an RESP
An RESP can be set up for any “beneficiary,” including your children, grandchildren, nieces, nephews or family friends. The “subscriber” to the plan is the person who opens the plan and makes contributions to it. The subscriber also designates the beneficiaries who are to use the funds for their post-secondary education. Each beneficiary must be a Canadian resident and have a social insurance number (SIN) which can be obtained from a Service Canada Centre (www.servicecanada.gc.ca ).
Contributing to an RESP
A subscriber can contribute any amount to an RESP, subject to a lifetime contribution limit of $50,000 per beneficiary. Although you cannot deduct the contributions made to an RESP from your taxable income, the subsequent investment earnings on RESP contributions are tax-deferred. If the plan earnings are withdrawn to cover qualifying post-secondary education expenses, they are taxable to the beneficiary, not to the subscriber. You can contribute to an RESP for up to 31 years, and the plan can remain open for a maximum of 35 years.
The Federal Government provides a grant of 20% of what you put into your RESP. Depending on your income, you may even be entitled to a higher percentage. Contact us to find out today.