RESPs: Registered Education Savings Plan

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Stephanie Milligan BA CLU CFP
RESPs Registered Education Savings Plan And
the CESG Canada Education Savings Grant
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Stephanie Milligan BA CLU CFP
How do they work? A registered Education Savings
Plan allows your money to grow tax-sheltered,
meaning that the money that you earn on the
investment does not need to be declared on your
annual tax return. Because of this and
compounding, your money grows much faster than if
it were left in a savings account.
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Stephanie Milligan BA CLU CFP
The Rules Maximum annual contribution 4000
Maximum lifetime contribution per beneficiary
42,000 If two parents and/or grandparents are
opening separate RESPs for the same child, they
must ensure that, combined, they stay within this
maximum Birth certificate and SIN are needed to
set up an account An RESP can stay open for 26
years
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Stephanie Milligan BA CLU CFP
Family versus Individual Plan In a family plan,
you name one or more children, but they must be
related to you. They may be your children,
grandchildren, brothers or sisters.
Contributions can only be made until the
beneficiary is 21 years of age. An individual
plan is for one person. This person may or may
not be related to you, and can be over 21 when
named. Since there are no age limits, you can
even set one up for yourself or another adult,
and contributions can be made up to 22 years
later.
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Stephanie Milligan BA CLU CFP
CESG rules effective January 1998 -provides an
extra 20 on the first 2000 of annual
contribution -has a lifetime maximum of 7200 per
beneficiary -forms part of the Educational
Assistance Plan(EAP), along with earnings -has
no impact on the contribution limit -it is paid
directly to the beneficiarys RESP -must be a
Canadian resident -is available for children aged
17 and under -for 16 and 17 year olds (when
establishing the account), there are special
rules please see hand-out -it is possible to
carry over the grant money to subsequent years,
if not used. It is also possible to catch up on
past grant money.
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Stephanie Milligan BA CLU CFP
15 year old starting an RESP right now 2006
contribute 4000 (2006 and 2005 CESG
credited-800) 2007 contribute 4000 (2007 and
2004 CESG credited-800) 2008 contribute 4000
(2008 and 2003 CESG credited-800) As per this
example, if your child were younger, you could go
back all the way to 1998, assuming they were born
in 1998 or earlier. As this example shows, its
not too late!!!
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Stephanie Milligan BA CLU CFP
Additional Grant opportunities CESG If your
net family income is below 36, 378, the Canada
Education Savings Grant will give you 40 cents
for every dollar on the first 500 you save in
your childs RESP each year. If you save more
than 500, you will get 20 cents for every extra
dollar, up to a maximum of 2,000 If your net
family income is below 72,756, the Canada
Education Savings Grant will give you 30 cents
for every dollar on the first 500 you save in
your childs RESP each year. If you save more
than 500, you will get 20 cents for every extra
dollar, up to a maximum of 2,000 2006 amount,
these amounts are updated each year based on the
rate of inflation
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Stephanie Milligan BA CLU CFP
Canada Learning Bond (CLB) to qualify -your
child must be born after Dec 31 2003
-you receive the National Child Benefit
Supplement (sometimes called
the family allowance or baby bonus). This usually
applies to families whose net
family income is less than 36,378 -you could
get 500 now to help start a savings plan and get
an extra 100 each year for up to 15 years -you
can also get an extra 100 per year for up to 15
years, as long as you continue to receive the
National Child Benefit Supplement -this is a
possible 2000 in grant money (plus
interest) 2006 amount, these amounts are
updated each year based on the rate of inflation
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Stephanie Milligan BA CLU CFP
What is a qualified educational
program? -includes apprenticeships and programs
offered by a trade school, CEGEP, college or
university and some correspondence
courses -usually a qualified educational program
is a course of study that lasts at least three
weeks in a row, with at least 10 hours of
instruction or work each week. A program at a
foreign educational institution must be at least
13 weeks -RESP funds can be used for either
full- or part-time study in a qualified program
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Stephanie Milligan BA CLU CFP
Withdrawals -your maximum withdrawal from the
EAP is 5000 for the first semester. (This limit
is lifted after 13 weeks and does not apply if
other than first semester and you provide proof
of enrolment for previous semester) -there is no
limit to the amount you withdraw from your PSE
(post secondary education) (capital) -EAP is the
default so ensure you select PSE when completing
the first withdrawal request for all funds above
this 5000 limit -for most companies, if all
paper work is completed properly, you are looking
at 3-5 days for a cheque to be mailed out and 5-8
days for a deposit to most major banks (longer
for trust companies and credit unions etc) -if
withdrawing at peak times, January and August,
this could be a little longer so think ahead!
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Stephanie Milligan BA CLU CFP
Proof of Enrollment (POE) -if incorrect proof
of enrollment documents are submitted, the
withdrawal requests will be delayed Valid Proof
of Enrollment (at least 1 of the following 3
items are required) 1.An Invoice or Receipt of
Payment for Tuition -be sent from the Office of
the Registrar or printed from the official
School website. If from a website, it must
clearly show the schools internet
address -display the schools logo/name -specify
a full tuition amount -clearly state the
students name -clearly indicate payment due
date and/or date of receipt
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Stephanie Milligan BA CLU CFP
2.Timetable -be sent from the Office of the
Registrar or printed from the official school
website. If from a website, it must clearly show
the schools internet address. -clearly state the
students name -state the course length and the
number of hours in a course load/program per
academic session -clearly indicate current
semester of study 3.Proof of Enrollment/Registrat
ion Letter from the Office of the Registrar -be
on schools letterhead -be signed or certified by
the Office of the Registrar -clearly state the
students name -clearly indicate current semester
of study -indicate the courses or program being
studied -state that the student is
enrolled/registered at the school
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Stephanie Milligan BA CLU CFP
Invalid Proof of Enrollment -letter of
Acceptance, does not prove the student accepted
the offer and enrolled/registered -offers of
admission, does not prove the student accepted
the offer and enrolled/registered -tuition fee
breakdown, lists all the courses and tuition fees
for a particular field but does not confirm
enrollment -student cards, does not verify the
current year of enrollment -past semesters proof
of enrollment, doesnt prove current year
enrollment -e-mails, even e-mails from the
school as they are not official
documentation -invoices/receipts for
non-tuition expenses or registration
deposits/fees such as books, rent etc as these do
not constitute proof of enrollment
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Stephanie Milligan BA CLU CFP
What if your child doesnt attend Post Secondary
Education? -as a parent you can transfer to any
sibling without penalty, including the grant
money up to the maximum of 7200 per
child -transfer up to 50,000 of earnings to your
own or your spouses RRSP, providing there is
available contribution room, the plan has been in
existence for over 10 years and your child is
over 21 years of age -donate investment income to
an accredited educational institution -or the
less appealing option is having to declare the
earnings as income, subject to the applicable
provincial and federal taxes, plus a 20 penalty
fee -the contributions are always your own
property -all other grant money must be returned
to the federal government
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Stephanie Milligan BA CLU CFP
Websites of interest hrsdc.gc.ca Key word
searches SIN and RESP canlearn.ca thinkeducatio
n.ca Key word search tuition fees
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Stephanie Milligan BA CLU CFP
Stephanie Milligan BA CLU CFP 613
384-1880 stephanie.milligan_at_cogeco.ca