RESP
An RESP is a special account to help people save for education after high school. The money earned in an RESP isn’t taxed until it is withdrawn. You can open an RESP for a child, yourself or another adult. This person is called your “beneficiary”.
Making contributionsThe lifetime contribution limit for each beneficiary is $50,000. If you contribute more than this, you may have to pay a tax on the excess amount. Unlike Registered Retirement SavingsPlans (RRSPs), you can’t deduct RESP contributions from your taxes. The number of years you can contribute depends on the plan, but it is usually between 18 and 22 years. Receiving paymentsOnce your beneficiary is enrolled in a qualifying educational program, they can start receivingpayments from the plan.
These payments are taxable in the student’s hands. Since moststudents have little or no other income, they will likely pay little or no tax. If your beneficiary does not go on to education after high school, You have a few options. Your plan may allow you to choose another beneficiary. In some cases, you can transfer the earnings to your RRSP. Or, you may be able to withdraw the earnings in cash, but you’ll have to pay tax on them. Youhave to return any grants to the government, unless you have a family RESP.
RESP FAQ
Why should I open a Registered Education Savings Plan (RESP)?
Because the Government of Canada will help you save money if you open an RESP account through the Canada Education Savings Grant and the Canada Learning Bond. They are only available for your child if you open an RESP.
When should I open an RESP?
Now! Start early—your savings can grow surprisingly quickly.
Who can open an RESP?
Anyone can open an RESP account for a child—parents, guardians, grandparents, other relatives or friends.
Where can I open an RESP?
At most financial institutions (such as banks and credit unions) or with a group plan dealer or certified financial planner.
What do I need to do to open an RESP?
Get a Social Insurance Number (SIN). o You must have one for your child to open the RESP. o There's no fee. However, certain documents, such as a birth certificate or permanent resident card, are required.
Do I need to deposit a minimum amount of money into an RESP?
It depends. Some types of RESPs have no minimum deposit requirements, while others do. The Government of Canada will still add to your savings, no matter how little you put into your child's RESP account.
Do I need to have a bank account to open an RESP?
No. You can open an RESP without having a bank account.
How much can I put into an RESP?
Up to $50,000 for each child (named in one or more RESPs). Although there are no annual limits on contributions made to an RESP, the Canada Education Savings Grant will only be paid on the first $2,500 of contributions made every year. If the child has accumulated grant room, then the Canada Education Savings Grant will be paid on the first $5,000 of contributions made per year. For more information on accumulated grant room, please vist the Frequently Asked Questions section of the Canada Education Savings Grant.
How often do I have to put money into an RESP?
Every RESP is different. o Some types require specific monthly contributions. Others let you put money into your RESP account whenever you want.The sooner you start to save, the sooner you'll be earning interest, and the more your money will grow. Even savings of $5 a week can quickly add up, especially when the Government of Canada adds money to your savings.
Can I open an RESP for myself?
Yes. o You can open an RESP at any age. While you can open a plan for a child, you can also name yourself or another adult as the definition of beneficiary. o Please note that all children up to the age of 17 are entitled to the Canada Education Savings Grant.An RESP allows adults to earn interest on their registered education savings plan tax-free.How is an RESP taxed (assuming the child continues education after high school) o Your money grows tax-free while it is in your RESP. o You don't get a tax deduction for the money you put into an RESP. o The money that your investment earns while it is in the RESP won't be taxed until money is taken out to pay for your child's education. o Money paid out of the RESP as an Educational Assistance Payment is taxed in the hands of the student. Since many students have little or no other income, they can usually withdraw the money tax-free. o The money that you have put in the RESP is returned to you, tax-free.
How is an RESP taxed if a child decides not to continue education after high school?
You will not be taxed on the amount you contributed to the RESP, but you will have to pay taxes on the money that you earned in your plan as interest. This money is called "accumulated income". It will be taxed at your regular income tax level, plus an additional 20 percent. o The money that you have put into the RESP is returned to you. o The Canada Education Savings Grant can be shared with a brother or sister if they have grant room available—otherwise, the grant must be returned to the Government of Canada. o When you close your RESP, you will have to pay tax on the earnings in the RESP. (Although there will be earnings on the Canada Education Savings Grant, the grant must be returned to the Government of Canada.) You may be able to reduce the taxes you have to pay by transferring your accumulated income to either your or your spouse's Registered Retirement Savings Plan. For more information, see the Accumulated Income Payments section of the Canada Revenue Agency's Web site. o Talk to your RESP provider to find out about any conditions that may apply to the plan if your child does not continue his or her education after high school.Can more than one RESP be opened for a child?Yes. A child can be named as the definition of beneficiary of more than one RESP account. However, you should be aware of the following information. o There is a lifetime limit of $50,000 that can be contributed for each child. o Be sure to find out if anyone else is making contributions to a plan for that child so that you don't go over any limits when you decide how much money to put into an RESP.
CESG
Annuities are a convenient and straightfoward option for retirement income. By making simple payments a stream of annuity payments are provided by HFG, they are made up of interest and principal ammounts which are based on your age (and possibly your spouse's age) , current interest rates, the duration of time for which the payments are guaranteed and the ammount of money used to purchase the annuity.
The chief benefit of annuity life income options is that they provide a steady stream of retirement income from your pension funds which is reinforced by the security that you will never outlive your money, what's more, you can rest assured that under this option, HFG will manage your money in such a way that market fluctuations shall have no bearing upon your investment.
Thus you can relax while we manage your money as your income payments under this option are guaranteed by HFG regardless of the wanton nature of economic flux, HFG will manage the money used to purchase your annuity so that you are not unnecessarily burdened by any investment decisions or concerns.
For registered funds, Your annuity payments will be taxed as income in the year that they are received, for non-registered funds the tax treatment is such that only a portion of each payment is taxed each year.
Within this option, there are three branches:
(i) Life Annuities - this stream provides you with income payments for as long as you live
(ii) Joint and Last Survivor Annuities - A joint life and last survivor annuity provides income payments as long as either you or your spouse is living.
(iii) Annuity Certain - An annuity certain provides you with a pre-determined number of income payments.
Canada Learning Board
AWhat is the Basic CESG?
Basic CESG is a payment of 20% on RESP contributions made in respect of an eligible beneficiary, up until the end of the calendar year in which the beneficiary turns 17.Over 3 million children have already received the Canada Education Savings Grant. Register your child today!
What is the Additional CESG?The Additional Canada Education Savings Grant (A-CESG) is extra money from the Government of Canada available to help you save for your child's education after high school. This grant is in addition to the basic Canada Education Grant that you may already be receiving in your child's RESP.Additional CESG is a payment (over and above the Basic CESG amount) of either 10% or 20% on the first $500 or less of annual RESP contributions made on or after January 1, 2005, in respect of an eligible beneficiary, up until the end of the calendar year in which the beneficiary turns 17.The amount of money that your child can receive in additional grant depends on the net family income of the child's primary caregiver.
For example, in 2012*, on the first $500 that you put into your child's RESP each year, the Additional Canada Education Savings Grant could add:up to $100, if your net family income is $42,707 or lessup to $50, if your net family income is between $42,707 and $85,414*To find out net family income, primary caregivers can consult their:Canada Child Tax Benefit (CCTB) Notice of DeterminationGoods and Services tax Credit/harmonized Sales Tax Credit (GSTC/HSTC) notice of DeterminationNotice of
Assessment or Reassessment (if married or have a common-law partner add the two Net Incomes - Line 236). Primary caregivers who still wish to call the CRA to confirm their net income can call 1-800-959-8281. They will be asked a series of questions specific to their account before the CRA can disclose net family income and would be required to have such tax or benefit statements on hand during the call.
Therefore the above options are the preferred options to present to subscribers instead of telling them to call the CRA.Please note that the family income amounts are updated every year and that the example is based on 2012 income levels.Who can get the Canada Education Savings Grant?
All children up to age 17 are eligible, as long as they are Canadian residents and an RESP has been opened for them.Special rules apply if your child is between the ages of 15 and 17.
What is it? Money from the Government of Canada to help you start saving early for your child's education after high school.Your child could get $500 NOW to help you start saving early for your child's education after high school, and an extra $100 each year up to age 15. That's up to $2,000 (plus interest) in bonds for your child's education.
And you don't have to put any of your own money into the RESP to get this bond.An extra $25 will be paid with the first $500 bond to help cover the cost of opening an RESP.The bond can be used to pay for full- or part-time studies in an apprenticeship program, a CEGEP, trade school, college or university.BrochureCheck out the Canada Learning Bond brochure, Get $500 for Your Child.
Who can get the bond?
Your child can get the $500 Canada Learning Bond plus an extra $100 per year up to age 15 if:- your child was born after December 31, 2003, and- you get the National Child Benefit Supplement as part of the Canada Child Tax Benefit, ---- - commonly known as "family allowance" or "baby bonus."
Bond gets RESP startedExtra dollars are always tight during winter for Lynne and her partner Daniel, who does seasonal construction work near Thompson, Manitoba. Sending their kids to college would be out of the question, they imagined.
Then Lynne's sister told them about money she had received through the Canada Learning Bond, even though she couldn't put any money into an RESP at the start. This is just the kind of help Lynne and Daniel needed.