A registered education savings plan (RESP) offers tremendous opportunity to house education funding in a tax-beneficial vehicle. However, unless you are dealing with them on a regular basis, RESPs can be confusing.
From eligibility criteria to grant support qualification to withdrawal procedures, the rules are stringent and potentially unforgiving if you’re not careful.
Planning for education can be a moving target
In fact, for most parents, the bridge from first knowledge to first withdrawal is measured in years or even decades. Consider my friends’ daughter who will begin university in September 2009. Since she was born in 1990,
Either or both of the annual and lifetime contribution limits have been raised on five occasions
The Canada Education Savings Grant has been modified as to both amounts and carryforwards, and the companion Canada Learning Bond has been introduced
Withdrawal commencement and plan durations have been extended and qualifying program definitions have been revised; and
Further benefits lie ahead for her younger siblings through the newly available Quebec Education Savings Incentive, the family being in Quebec, obviously (Note that Alberta also provides provincial support through the Alberta Centennial Education Savings Grant)
Though these changes have injected a degree of havoc in the parents’ planning, the havoc has certainly been welcome in terms of enhanced savings growth. The challenge now, as they commented to me recently, is to shift gears to learn and manoeuvre a new set of rules (new to them, that is) governing the drawdown of those funds.
But it’s not just parents who are challenged.
We’re here to help you figure it all out
Even conscientious advisors can be hard-pressed to maintain top-of-mind awareness. Understanding RESPs can be an education in itself, and an advisor’s desire and need to keep current could be very time-consuming – and that’s even before considering all the “acronyms” you must keep track of.
To provide some assistance we have developed a new RESP InfoCard that complements the text treatment in our RESP InfoPage. This back-to-back format tool provides quick reference to key information like age and time constraints, up-to-date financial data and technical rule compliance.
And of course, if you are looking for clarification or expansion on these and other tax and estate issues, our InfoService team is always available to you at the end of the phone line or via e-mail.