Valentin 1997

Registered Education Savings Plan ( RESP)

You and your spouse were blessed with an irreplaceable gift of life, a CHILD.  After the initial anticipation and excitement of birth has settled, you begin to think about his/her future.  As a parent, you have the opportunity to set up an Education Fund to assist financially with your child's post-secondary studies.  You probably have heard about the RESP program and how it works, but as well you need to be aware of the two different types of RESP's that are offered in Canada.

Valentin 2014

How RESP works:

1. Subscriber ( parent, guardian, relative)  contributes to RESP ( No annual contribution limit (up to $2,500/year recommended), but subject to a maximum of $50,000 lifetime contribution limit per Student Beneficiary
2. Government contributes grants/incentives ( depending on family income 20%-40% and/or $500)                                        
3. Promoter ( company that manages RESP) administers funds. As long as earned income stays in the plan it is accumulated tax-free.
4. Subscriber can withdraw his/her contributions tax-free. 

Individual/Family RESP

• Flexibility of the amount and timing of contributions
• Ability stop contributions at any time
• No guarantee that your child will attend post-secondary institution
• There are no annual fees payable outside of the Management Expense Ratio (MER)

Types of withdrawals:

1. Beneficiary enrolls in Post-Secondary Education

• Contributions (PSE) returned to subscriber tax-free
  
• Grants, Incentives, Interest earned ( EAP)  taxable to beneficiary at his/her marginal tax rate

2. Beneficiary DOES NOT enroll in Post-Secondary Education

• Contributions (PSE) returned to subscriber tax-free
• Grants, Incentives returned to government
• Interest Earned ( AIP) returned to subscriber and taxable at his/her marginal tax rate + an additional 20% OR rolled into subscriber's RRSP ( some conditions apply)

Group Scholarship RESP 

• Set contribution amount for set number of years
• You have to stay with plan till maturity date
• You are planning that your child will attend 3-4 years of post-secondary institution
• Fees associated with plan ( ask provider for complete fees disclosure)

When you are offered a Group RESP you should ask a following questions:

What will happens when:

1. You leave the Plan before the Maturity Date
   
2. You miss/stop Contributions
   
3. You miss the deadline for making changes to your plan
   
4. Your child doesn’t go to a qualifying school or program.
   
5. Your child doesn’t qualify for all four ( earned Income) EAPs