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Registered Education Savings Plan (RESP)
A Registered Education Savings Plan (RESP) is a government approved Plan that provides for the future post secondary education of a beneficiary. Although contributions to RESPs are not tax deductible, the interest earnings within the Plan are not taxed until eventually withdrawn by the beneficiary for educational purposes. Interest earnings are taxed in the hands of the beneficiary, in the year of withdrawal. These educational assistance payments are treated as income in the student's hands, whether paid to the post secondary school or to the student. However, since most students have low earnings and can claim a tuition credit and basic personal credit, the rate of taxation is often quite low.
An RESP can be established for an individual at any age. The subscriber can name anyone as beneficiary, a child, or grandchild, a relative or friend. A Plan can even be established for the subscriber or his/her spouse as a means of going to college after retirement. If the person designated as the Plan's beneficiary does not go on to post secondary education, the subscriber can name someone else instead. In order to receive payments from the Plan, the beneficiary must be enrolled on a full-time basis in a qualifying education program.
The Canada Educations Savings Grant (CESG) is a program offered by government in which investors in RESPs' receive an additional grant of 20% on the first $2,000 of annual investment. This means the investor can receive up to $400 a year in addition to their investment.
Credit Unions offer RESPs with the deposit options of variable daily interest rate or fixed rate term deposits, or a combination of both. Any amounts deposited to the Plan can be withdrawn, subject to the maturity of any non-redeemable term deposits. The Credit Union Plan provides for only one beneficiary per plan, but a subscriber can have more than one plan, each for a different beneficiary.
Check with individual Credit Unions for product availability.
