REGISTERED EDUCATION SAVINGS PLAN

FAQs for an RESP (Registered Education Savings Plan) in Canada:

1. What is an RESP?

An RESP is a specialized savings account designed to help Canadians save for a child's post-secondary education. It offers tax advantages and government grants to boost savings.

2. Who can open an RESP?

Parents, guardians, grandparents, other family members, and even friends can open an RESP for a designated beneficiary (the child who will eventually use the funds for education).

3. What are the benefits of an RESP?

The main benefits of an RESP include tax-deferred growth on contributions, access to government grants (such as the Canada Education Savings Grant), and flexibility in investment options.

4. What is the Canada Education Savings Grant (CESG)?

The CESG is a government grant that matches a portion of contributions made to an RESP. It can provide an additional 20% to 40% of the first $2,500 contributed annually, depending on the family's income and contribution levels.

5. What happens if the beneficiary does not pursue post-secondary education?

If the beneficiary decides not to pursue higher education, there are several options. The funds can be transferred to a sibling's RESP, the account owner's RRSP (up to a certain limit), or withdrawn with associated taxes and penalties.

6. Can multiple RESPs be opened for the same beneficiary?

Yes, multiple RESPs can be opened for the same beneficiary, but the total lifetime contribution limit remains the same across all plans.

7. What are the contribution limits for an RESP?

The lifetime contribution limit per beneficiary is $50,000, and there are no annual contribution limits. However, government grants may have specific annual and lifetime limits.

8. Can I carry forward unused CESG grant room?

Yes, you can carry forward unused CESG grant room for up to one year, allowing you to catch up on missed contributions and receive grants from previous years.

9. When can funds be withdrawn from an RESP?

Funds can be withdrawn from an RESP once the beneficiary enrolls in a qualifying post-secondary education program. The withdrawals consist of the original contributions (non-taxable) and accumulated earnings (taxable in the beneficiary's hands).

10. What happens if the beneficiary doesn't pursue post-secondary education?

If the beneficiary does not pursue higher education, there are a few options. The funds can be transferred to a sibling's RESP, transferred to the account owner's RRSP (up to certain limits), or withdrawn with associated taxes and penalties.

11. What happens to the RESP if the beneficiary decides not to attend college or university?

If the beneficiary decides not to pursue post-secondary education, and there are no other eligible beneficiaries, there are options such as transferring RESP funds to an RRSP, donating to a Registered Disability Savings Plan (RDSP), or closing the RESP and taking the remaining funds as taxable income.

12. Can an RESP be used for educational expenses outside of Canada?

Yes, RESP funds can be used for qualifying post-secondary education outside of Canada, as long as the educational institution is recognized by Employment and Social Development Canada (ESDC).

13. Is there an age limit for contributing to an RESP?

There is no age limit for contributing to an RESP. However, government grants are only available until the beneficiary turns 17, and contributions can only be made until the beneficiary turns 31.

14. Can an RESP be used for primary or secondary education expenses?

While RESPs are designed for post-secondary education, a subscriber can request Educational Assistance Payments (EAPs) to cover primary or secondary education costs in certain circumstances, if the plan allows.

15. What happens to the RESP if the account holder passes away?

In the event of the account holder's death, the RESP assets can be transferred to the beneficiary tax-free if there is a successor subscriber named. Otherwise, the RESP can be collapsed, and the funds can be transferred to the beneficiary's other RESPs or RESP beneficiaries, or paid to the estate.

Please note that RESP rules and regulations can change, and it's essential to consult with a qualified financial advisor or tax professional for personalized advice regarding your specific situation.

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