An RESP is a tax-deferral plan designed to help parents, grandparents and anyone interested in saving for a child's education. While RESP contributions are not tax deductible, the income earned on contributions held inside the plan compounds on a tax-deferred basis. The lifetime contribution limit per beneficiary is $50,000. The CESG will only be paid on the first $2,500 of contributions per beneficiary per calendar year. The lifetime CESG limit per beneficiary is $7,200. While a child may be the beneficiary of more than one RESP, all contributions made to the respective plans cannot exceed the stated maximums. When the income and CESGs are eventually withdrawn from the RESP to pay for education-related costs such as tuition, books, travel and accommodation, they are taxed in the hands of the beneficiary (the student), not the subscriber (contributor) and should attract little or no tax if withdrawn over a number of years.
At BMO Nesbitt Burns, our experience has shown that a dedicated savings strategy, that includes a Registered Education Savings Plan (RESP), has proven to offer the greatest assurance that the money will be there when it's needed.