By Christian White, BA CFP
When a child is a resident of Canada and receives a permanent social insurance number, they instantly qualify for Registered Education Savings Plan (RESP) benefits. For example, every dollar invested in an RESP attracts a 20% grant through the Canada Education Savings Grant Program (CESG). The annual amount added to the grant room is $500 per beneficiary, and the maximum amount of CESG that can be received in any given year is $1,000. A $2,500.00 annual deposit collects the beneficiary a $500.00 grant up to and including the year the child turns 17, to a lifetime limit of $7,200.
There is a lifetime maximum of $50,000.00 in deposits that can be made to a beneficiaries RESP, which would attract another $7,200 in tax-free grants. When funds are redeemed, they are taxable in the hands of the beneficiary, if if he/she attends a post-secondary institution in an eligible program. Due to lower incomes, education credits and deductions, the beneficiaries can typically redeem the funds tax free.
Deferred growth, a guarantee of 20% and the potential to spend the funds tax free. Why do so many overlook these plans? These are the top 5 most common misconceptions:
"Anytime I ask for something, it is taken care of very promptly and professionally."