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|A Registered Education Savings Plan (RESP) is a tax deferral plan designed to help save for a student’s post-secondary education. Although contributions to an RESP are not tax deductible, all of the income in the plan compounds on a tax deferred basis. In addition, there is also the Canada Education Savings Grant (CESG) – a program the federal government introduced in 1998 – that now deposits up to $500 per year directly into the RESP ($400 prior to 2007). Finally, when the accumulated income and CESG is withdrawn from the RESP to pay for education expenses – the student pays the taxes, not the subscriber. The full amount of the withdrawal is taxed in the student’s hands as ordinary income.
Please note that BMO Nesbitt Burns only offers support for the basic Canada Education Savings Grant (CESG). Other government grant programs, such as the Canada Learning Bond and the enhanced CESG that are available to lower income families, can not be administered in a BMO Nesbitt Burns Self Directed RESP. This policy is consistent with other full service brokerage firms.