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What are Registered Education Savings Plans (RESP)?

October 22, 2019

Tax Question:

What are Registered Education Savings Plans (RESPs)?


An RESP is a registered account, introduced by the federal government in 1974, and applied retroactively in 1972 for applicable trusts. It is a flexible investment account with contribution limits that allows an individual to earn tax-deferred investment income and capital gains in the account. RESPs may also be eligible for government funding through the Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), Alberta Centennial Education Savings Plan Grant (ACESPG), Quebec Education Savings Initiative (QESI) and/or the British Columbia Training and Education Savings Grant (BCTESG). There are three parties to an RESP; a subscriber (owner), a promoter (plan provider) and a beneficiary. There can be multiple subscribers, promoters and beneficiaries. Contributions to an RESP are not tax-deductible. There are no annual contribution limits. However, the lifetime contribution limit for total RESP contributions for a single beneficiary is $50,000. Government funding is not included as part of this limit.


We have Jack Quinn and the Tax Review Board in 1972 to thank for having RESPs today. Jack had some funds placed into a trust for his son’s education and sought to exclude $110 from his taxable income for which the government took him to court. RESPs since then have become considerably more generous with increased contribution limits, greater flexibility, the ability to transfer RESP proceeds into an RRSP, the introduction of the CESG, the CLB and the expansion of the CESG for low-income families. RESPs allow families to save $2,500 per year, per child, get $500 or more from government funding and be able to invest those funds in virtually any type of investment. From an investment standpoint, you will make 20% on your initial contribution and enjoy tax-deferred growth Ð an awesome starting point. I encourage families to open RESPs with promoters (plan providers) that will allow them complete investment and portfolio freedom. Many RESP promoters will lock them into a long-term contract or a fixed investment pool; these plans are often referred to as group savings plans. As families and your children grow, your investment approach and portfolio may change. Additionally, some families may look to RESPs as a starting point for introducing their children to investing. Please watch for further FAQs on RDSPs and our segue to savings plans in the United States.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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