Registered Education Savings Plan (RESP)
A Registered Education
Savings Plan (RESP) is a government-approved plan for the purpose of
providing post-secondary education funding for a beneficiary. Income
earned within the plan is not taxed until it is withdrawn. A Credit
Union Registered Education Savings Plan is the smart way to save for
your family’s future.
A post-secondary education is critical in an increasingly competitive
job market. Each year, fewer high school graduates are in a position
to afford to continue their education. With the costs of higher
education increasing almost every year, early planning is essential.
Average Cost Of University Education
1962 - $6,894
1998 - $60,842
20nn - $???,??? Investing
in an RESP will assist your family to have more financial freedom to
choose their future. By starting now, you can grow your education
funds by making affordable, convenient monthly deposits. Planning
today for tomorrow is the smart way to realize you family’s
educational goals. RESP
Contribution Limits
-
Annual: $4,000 per
beneficiary
-
Lifetime: $42,000 per
beneficiary
The Subscriber
The subscriber is the registered owner of the plan and can be an
individual or an individual and his/her spouse. Only the subscriber
can make contributions to an RESP and these contributions are not tax
deductible. The
Beneficiary The
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
beneficiaries of a Family Plan must be "related" to the subscriber(s).
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 $2,000 deposited
into an RESP for children up to age (18) eighteen.
All children under the age of 18 and resident in Canada automatically
accumulate CESG contribution room.
Your Credit Union offers
a variety of smart investment options that can assist you in
maximizing your RESP contributions.
Educational Assistance Payments
Educational Assistance Payments 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.
When the named Beneficiary does not enroll in Post-Secondary
Education If the
beneficiary does not enroll in post-secondary education, you have the
following options:
-
Change the plan
beneficiary.
-
Transfer funds to another
RESP where you are the subscriber.
-
Collapse the plan
If you choose option #3,
you will have to return the unused CESG monies to the government. The
principal monies are considered a refund of contributions and can be
withdrawn without penalty. The following options are available for
disbursement of income earned within the plan:
Qualified
Post-Secondary Institutions
Most Canadian post-secondary institutions and programs, including
correspondence courses, qualify for the purpose of receiving RESP
Educational Assistance Payments. Certain foreign post-secondary
institutions may qualify.
Advantages of an RESP
-
Additional education
funding is provided by the CESG
-
Income earned within the
plan is not taxable until the beneficiary enrolls in the
post-secondary education and withdraws the funds for educational
purposes. The beneficiary will usually have a lower marginal tax rate.
-
Long term planning for a
beneficiary to attend a post-secondary institution
-
The subscriber may use
RESP contributions as collateral for a loan.
-
RESPs are available as
single or family plans
For more information
about this or any other financial product, please contact our
knowledgeable staff. |
