RESPs

Benefits

• The Canada Education Savings Grant (CESG).
  
• Income earned within the plan is tax-sheltered until withdrawn.  If withdrawn by the beneficiary, he or she will usually have a lower marginal tax rate.
  
• An RESP provides long-term planning for a beneficiary to attend a post-secondary institution.
  
• Contributions belong to the subscriber and can be withdrawn without consequence once the beneficiary is eligible to receive payments.
  

Contribution limits

The lifetime contribution limit is $50,000.  This was increased from $42,000 in 2007.

For more information visit Canada.ca below.

The subscriber

The subscriber is the registered owner of the plan and can be an individual, or an individual and his or her spouse.  The subscriber makes contributions to an RESP and these contributions are not tax deductible.  Also, a subscriber cannot deduct the interest paid on money borrowed to contribute to an RESP.

The named beneficiary

The named beneficiary is eligible to receive the Educational Assistance Payments from the plan.  There is a limit of one beneficiary per plan, except under a Family Plan, which provides for multiple beneficiaries.  The beneficiares of a Family Plan must be related to the subscriber(s).

An individual must have a SIN and be a resident of Canada to be designated as a beneficiary under an RESP.

Canada Education Savings Grant (CESG)

The CESG program allows eligible RESP beneficiaries to receive grant monies based on the annual contributions paid into the plan.  The government will contribute 20% annually on the first $2,500 deposited into an RESP for children to the end of the year in which a child attains age 17*.  All children under the age of 18* who are resident in Canada automatically accumulate CESG contribution room.

• Annual CESG maximum:  $500 per beneficiary
  
• Lifetime CESG maximum:  $7,200 per beneficiary
  

Eligible beneficiaries receive up to 20% additional CESG on the first $500 RESP contributions. Eligibility for additional CESG is determined by the child's family's net income and entitlement to the National Child Benefit (NCB) supplement.

• Eligible beneficiaries could receive additional CESG of $100 annually for a total combined basic and additional CESG of $600 annually
  
• Lifetime CESG maximum remains at $7,200 per beneficiary.
  

*Some restrictions apply for RESP beneficiaries age 16 and 17.

Educational assistance payments

Educational Assistance Payments (including interest earned and CESG) may be drawn from the RESP to cover expenses associated with the pursuit of higher education in a qualified program -- tuition fees, textbooks, room and board, etc. These payments are taxable to the beneficiary.

Qualified post-secondary institutions

Most Canadian post-secondary institutions and programs, including correspondence courses, qualify for the purpose of receiving RESP Education Assistance Payments.  Certain foreign post-secondary institutions may qualify.

Your Options if a Named Beneficiary Does Not Enroll in Post Secondary EducationIf a named beneficiary does not enroll in post-secondary education you have several options for the plan.  Note:  An RESP can exist for a maximum of 25 years after the year it is opened, at which time #3 becomes the only available option.

1. Change the plan beneficiary**.
   
2. Transfer funds to another RESP**.
   
3. Collapse the plan**.
   

If you choose #3 you will have to return the unused CESG monies to the government.  The principal monies are considered a refund of the contributions and can be withdrawn without penalty.  The following options are available for disbursement of income earned within the plan:

• Transfer funds to the subscriber's RRSP or to a spousal plan**
  
• Withdraw the funds**
  
• Transfer funds to the Designated Educational Institution**
  

**Some restrictions and/or penalties apply.

Tips on preparing to access RESP funds

If the time is approaching that you need to access RESP funds for education purposes, following are some important details for the redemption process to ensure a smooth transition.

Tandia works with our registered plan trustee, Concentral Financial for the administration of RESPs. They ensure we abide by the rules set out in the Income Tax Act for the release of funds.

For each and every RESP withdrawal, the beneficiary must provide Proof of Enrollment from the post-secondary institution.  This document confirms that the beneficiary has officially enrolled at the school and it is usually provided immediately after payment of tuition fees.

Please note that this document is not the same as a "Notice of Acceptance" which is usually the first letter a student receives to advise that they have been accepted to a post-secondary program.  Unfortunately it does not confirm that the student has enrolled.  Please ensure you obtain an original copy of the Proof of Enrollment as this is the only accepted form mandated by the Income Tax Act and it will be required by Tandia to process the RESP withdrawal.

We are here to help make the transition to post-secondary education as smooth as possible. Please contact our Member Solutions Centre toll-free at 1.800.598.2891 or visit your branch if you have questions regarding access to RESP funds.