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An RESP is a tax deferral plan intended to encourage saving for post-secondary education.
RESP contributions are not tax deductible. However, income generated by the contributions is tax sheltered.
Canada Revenue Agency (CRA) regulations state that RESP contributions belong to the subscriber. Contributions to an RESP account from an In Trust For account is a breach of trusts and is therefore not permitted.
Canada Savings Bonds must be registered in the name of subscriber to complete the contribution.
The following restrictions apply:
It is never too late to start
What if your child was eight years old before you decided to open an RESP? How much of the grant will he or she be entitled to?
The CESG has been accumulating since your child was born whether or not he or she has an RESP. Therefore, your child will currently have the cumulative grant room from the previous eight years.
If you open an RESP today and contribute $5,000 each year for seven years, the plan will receive grants totalling $7,000. If the RESP earns an eight per cent return, there will be over $57,000 in the plan. As you can see, it's never too late to start an education savings program and take advantage of the Canada Education Savings Grant.
For more information, please refer to the RESP Concept Sheet or contact Jan Canning.