Registered Education Savings Plan (RESP)
Description
A Registered Education Savings Plan is a tax-deferred vehicle offered by the federal government. The person who contributes to the plan is called the subscriber. The person who intends to use the money in the plan for post-secondary education is called the beneficiary. There can be more than one beneficiary of an RESP, and the beneficiaries are usually children.
Objective
To provide an account that individuals can use to save for qualified post-secondary education expenses for eligible students.
Suitability
An RESP is suitable for anyone who wants to set money aside for post-secondary education expenses.
Features
- Contributions: Subscribers may contribute up to a lifetime maximum of $50,000. The contributions are not tax deductible and can only be made for 21 years from the child's birth date for family plans and up to the end of the 21st year of existence for individual plans.
- Government Assistance: The federal government has made RESPs even more attractive in its 2007 Federal Budget. The government now offers a grant of 20 per cent on the first $2,500 invested in an RESP per beneficiary each year. The grant, known as the Canada Education Saving Grant, is a maximum of $500 per year per beneficiary.
- Transfer: Up to $50,000 per subscriber of eligible RESP income can be transferred to an RRSP or a Spousal RRSP. If the subscriber chooses this option, then the RESP must be collapsed by March 1st of the year following the withdrawal. Income in excess of the subscriber's contribution room will be subject to a 20 per cent penalty tax on top of the tax incurred by including the RESP proceeds in the subscriber's income.
For more information, please contact your Edward Jones financial advisor*.
