Registered Education Savings Plan (RESP) for Your Children’s Post Secondary Education
Not every parent in North American can make their children take post secondary education because it is very expensive. If you want to let your children go to college someday, you should make plans for it because you might find yourself with a large financial burden if you don’t. Sending you kids to college will only be possible if you are looking at finally having some financial security.
If your children want to go to college then it can be possible through RESP or Registers Education Savings Plan. The RESP is a savings plan that can grow tax free and is something that is sponsored by the government. Money paid from the plan at maturity may be taxed as income for the student.
This savings plan is administered by private companies and persons who will collect the contributions and invest them accordingly. Every year, the contributions can reach up to $4,000 per student beneficiary with a lifetime limit of $42,000 without any tax implications. Each student may have more than one plan but the limit is strictly per student.
Before reaching his 17th birthday, the government adds 20% to the amount that is contributed to the RESP. The additional money given by the government is called the Canada Education Savings Grant or CESG, and this amount in not included in the annual limit for tax purposes.
A student can receive from CESG a maximum of over $7,200 over the lifetime of the plan. You can claim $800 of amounts not previously claimed from the CESG. RESP that is not eventually used for educational purposes will require that the contribution given by the CESG be returned to the government.
Any student who is a resident of Canada and has a Social Insurance Number (SIN) can apply for RESP. The SIN of both the student and the one providing the contributions must be provided to the promoter at the inception of the plan.
RESP plans comes in three types and they are discussed below.
The non-family plans allows other people to contribute to the plan without limit, but there can only be one beneficiary.
The family plan can have one or more beneficiaries as long as they are blood relatives or adopted by the person making the contribution. There are no requirements as when you should pay and how much you are going to contribute.
The group plan are offered by foundations that set how much is paid in and when. Plans are given to age groups who share the contributions equally. Because of the complicated rules attached to the group plan, there is a need to do a thorough research together with the plan provider before committing to this plan.
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