SAVE FOR YOUR CHILDREN'S EDUCATION

The best way to secure a child's future is to subscribe to a Registered Education Savings Plan. An RESP helps you finance post-secondary studies by growing the money that you've put into a tax-sheltered environment. When that child—the designated beneficiary—starts his or her academic program, we'll make payments to him or to her from the accumulated funds.

CHOOSE THE TYPE OF RESP THAT MEETS YOUR NEEDS

There are two types of RESP:

Individual RESP
This type of plan is designed for one beneficiary. There is no restriction as to who can be designated as the beneficiary. The plan has a maximum 35-year term and there is no age limit applicable to the beneficiary. You decide on the amount and frequency of your contributions and you can take a break from contributing at any time.

Family RESP
This type of plan includes one or more beneficiaries who are related to the subscriber by blood  or by adoption. The maximum term for this type of plan is 35 years, but no person who is over 21 years old can be named as beneficiary. As with an individual plan, you the subscriber decide on the amount and frequency of your contributions, and you can take a break from contributing at any time.

WHO CAN SUBSCRIBE TO AN RESP?

This varies according to the type of account, but a subscriber can be a family member such as a parent, a grandparent, aunt or uncle, a friend or anyone who wishes to invest money for a child's post-secondary education.

The subscriber must:

• be at least 18 years old
• be a Canadian resident
• have a social insurance number.

Also, an RESP can be signed jointly by an individual and his or her spouse¹. Subscribers must give the promoter their social insurance number and the social insurance number of each of the beneficiaries.

WHO BENEFITS FROM THE PLAN?

The promoter agrees to pay out educational assistance payments (EAP) to the person registered in a post-secondary course of study (the beneficiary).

For the purposes of the plan, the beneficiary must:

• be a Canadian resident
• have a social insurance number.

TAKE ADVANTAGE OF THE CANADA EDUCATION SAVINGS GRANT (CESG)

One of the main advantages of an RESP is that you are entitled to receive the Canada Education Savings Grant (CESG). The value of this grant is 20% of the first $2,500 of annual contributions and can be up to $500 per year per beneficiary.

Also, unused grant room from previous years (until 1998, if the child was born in 1998 or before) can be used. For each child born after 1997, the total amount of money that can be granted under the CESG over the life of the plan is $7,200.

HOW ARE THE PAYMENTS MADE?

Educational assistance payments (EAP) are made to the beneficiary in keeping with the subscriber's instructions. The maximum EAP that can be paid out before the end of the first session of full-time study (typically a period of 13 consecutive weeks) is $5,000² ($2,500 for part-time studies). Thereafter, if the beneficiary needs all the investment income and the entire grant the same year to cover tuition fees, there is no limit and the entire amount may be withdrawn.

RECOVERING THE FUNDS IF THE BENEFICIARY DOES NOT PURSUE POST-SECONDARY STUDIES

If the RESP beneficiary does not pursue post-secondary studies and if no other beneficiary is (or can be) appointed, the grants must be returned and the subscriber's contributions will be returned. Also, the subscriber may receive the income generated from the RESP in the form of an accumulated income payment, under certain conditions.

¹ A trust may not serve as a subscriber.
² The amount may be higher for certain programs known to have higher tuition fees.