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What are the RESP Rules, Maximums and Contribution Limits?

An RESP is a tax-deferred education savings vehicle by which the federal government allows a subscriber to save money for a beneficiary’s post-secondary education.  The introduction of the Canada Education Savings Grant (CESG) program in 1998 has made RESPs more attractive than ever before.  The federal government will match 20% of what the subscriber contributes each year to the eligible beneficiary, up to a maximum of $500 per beneficiary per year ($1,000 if there is CESG carry-forward room).

There are two types of RESPs:

  • Individual - One person is the beneficiary and he/she does not have to be related to the subscriber
  • Family - There can be more than one beneficiary as long as they are all under 21 and related to the subscriber by blood or adoption.

In order to receive the additional grants or bonds the Family RESP must have only beneficiaries that are all siblings of each other.

Contributions are not tax-deductible and while you can take out your contributions, tax-free any time (withdrawal may have an effect on grants), the growth/income portion of the RESP can only be withdrawn as an EAP if the beneficiary is actually enrolled in a qualifying education program or within six months of the last date enrolled.  If the beneficiary is not enrolled, grants will be returned to the government.

Contributions can be made each year for the first 31 years of the plan (or to the age 31 for beneficiaries of Family RESPs). The lifetime limit per beneficiary has increased to $50,000; while there is no longer an annual RESP contribution limit, there are maximum annual payments from the grant and incentive programs.

The annual maximum for Basic CESG is $1,000; $500 will be paid on the first $2,500 and up to $500 will be paid on the next $2,500 depending on the CESG carry-forward room available. Additional contribution amounts above $5,000 in the same calendar year will not receive a CESG.  The maximum lifetime CESG Grant per beneficiary is $7,200.  In order to be eligible for the Basic CESG, the beneficiary must be a Canadian resident at the time of contribution and the contributions are made before the calendar year the beneficiary turns 18 years old, with special conditions in the year the beneficiary is 16 or 17.

An RESP matures in 35 years  If money remains in the plan, you may request that the principal amount of contributions be returned to you, the beneficiary, or be transferred to another type of account.  Any remaining grants will be returned to the government.  And provided certain conditions are met, you can transfer up to $50,000 of accumulated RESP income to your RRSP.

Subject: education
This article is solely the work of Patricia Lloyd for the private information of her clients. Although the author is a registered Mutual Fund Representative with HollisWealth, a division of Scotia Capital Inc, this is not an official publication of HollisWealth. The views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of, HollisWealth.

HollisWealth is a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.™ Trademark of The Bank of Nova Scotia, used under license.

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I am passionate about helping families confront the elephant in the room and build an integrated financial management strategy that can benefit all family members. I have sound philosophies that guide all of my client relationships and I have a proven, organized internal process that helps create strategic portfolios for my clients and their families.

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Patricia Lloyd
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