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Registered Education Savings Plans

There is no better way to save for school!

Registered Education Savings plans (RESPs) are the best plans to save for your children’s future education aspirations. If you contribute $2500 into an RESP, the government will automatically match 20% and put $500 into your RESP to grow tax sheltered. You can do this every year for each of your children until they turn 18. The most any child can earn is $7200 in grant money. Starting early is the key to earning long term compounded growth. By investing over the long term, you will earn tax sheltered growth on your contributions as well as the government contributions. This plan is available as soon as your child or grandchild is born.

There are a lot of rules regarding RESPs that are important to pay attention too. That’s where we can help. We work with our clients to ensure that they are maximizing the potential of their education savings plans.

Below are a few of factors to consider that are often overlooked:

  • Individual vs Family plans – Grant money can be shared between beneficiaries in a family plan to ensure that the full amount that was earned, is used and not returned back to the government. It is important to plan for RESP withdrawals to make sure that you receive the full benefit of the plan.

  • Taxation – contributions are not taxable when they come out of the plan, but your growth and grant redemptions are taxable to the beneficiary. It is important to consider the entire taxable income of the beneficiary when making RESP withdrawals to ensure we are being as tax efficient as possible.

  • Over contributions – If you put in more than $2,500 per year, you will still get sheltered growth, but you will not receive any further grant money.

  • Missed contribution years – You can make up for missed contributions, but you can only catch up 1 year at a time. Anything over that amount will not receive grant money. If you contribute more than $5000 for any beneficiary that has catch up room in a single year, you would not receive any further grant.

  • Not attending Post Secondary – There are punitive rules in place for RESPs if the beneficiary decides not to go to school. Grant money is returned to the government and any growth in the plan may be penalized.

These plans truly are the best way for parents or grandparents to help children get a head start on their post secondary savings. Although, they can be complicated, with proper planning, you can be sure to use them to your full advantage.

We can help!


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