Planning You Child’s Post Secondary Education with RESP
To have a post secondary education is North America is something very expensive, and unless you are a wealthy family, you will have second thoughts about letting your children have them. It is important to plan for your children’s college education and think of the necessary finances for this decision. If families are looking at having some financial security, then sending their kids to college is a big possibility.
If your children want to go to college then it can be possible through RESP or Registers Education Savings Plan. The RESP is a savings plan that can grow tax free and is something that is sponsored by the government. Money paid from the plan at maturity may be taxed as income for the student.
Private companies or persons administer the plan and they will collect contributions and invest them accordingly. The yearly contributions per student can reach up to $4,000 per student and the lifetime limit is $42,000 without any tax implications. Students sometimes get more than one plan but the limit is strictly per student.
Before reaching his 17th birthday, the government adds 20% to the amount that is contributed to the RESP. The additional money given by the government is called the Canada Education Savings Grant or CESG, and this amount in not included in the annual limit for tax purposes.
The maximum amount that any student can receive from the CESG is $7,200 over the plan’s lifetime. You can claim $800 of amounts not previously claimed from the CESG. RESP that is not eventually used for educational purposes will require that the contribution given by the CESG be returned to the government.
If you are a resident of Canada and have a Social Insurance Number or SIN, you can apply for the RESP. The SIN of both the student and the one providing the contributions must be provided to the promoter at the inception of the plan.
The three different RESP plans are given below.
In the non-family plan, anyone can make a contribution and there are no limits to the amount but only one student can benefit from it.
The family plan can have one or more beneficiaries as long as they are blood relatives or adopted by the person making the contribution. When to pay or how much to pay are not restricted.
The group plans have requirements of the amount that is paid and when it should be paid and are usually offered by foundations. Plans are given to age groups who share the contributions equally. Before deciding on the group plan, there should be adequate research done with the plan providers because the rules to this plan are quite complicated.