What is an RESP Canada?

We all like saving on our taxes - and an RESP from Heritage Education Funds is designed to do just that. No tax while it grows

While your RESP contributions are not tax deductible the way they are for your RRSP, the investment earnings your contributions make within your education fund are sheltered from tax.

Your RESP also provides a tax shelter for any interest or other investment earnings your government grants earn within the plan. Low or no tax when it's needed.

When it's time to receive Educational Assistance Payments (EAPs) from the RESP, it is taxable in the student's name. And since students typically have low income and high exemption status, the tax payable should be low or non-existent.

A visible difference

Want to see the difference that saving for a child's education with an RESP can make? Just take a look at this chart and see how much greater your savings can be with an RESP and the Canada Education Savings Grant (CESG). You could be ahead by over $31,800!

Start young

You can start a RESP for any child (Beneficiary) under 15 years of age. Remember, though, the younger the Beneficiary is when you enroll in the plan, the more time you'll have to save - and the less you'll need to contribute to reach the maximum.

Stay safe

Your contributions and government grant payments are invested in various low-risk investments by professional money managers and administrators. Your portion of these "pooled funds" is determined by the number of shares (units) you purchase and their value.

Receive your share

One of the key characteristics of the Heritage Plans is that all contribution methods are designed so that an approximately equal amount of accumulated interest per unit is expected to be earned by the Maturity Date. That means all Beneficiaries with the same Year of Eligibility receive the same Educational Assistance Payment (EAP) amount on a per unit basis (depending on the payment option chosen). The value of the units depends on interest rates and the number of beneficiaries who pursue a post-secondary education each year.

Use your Educational Assistance Payments anywhere

When it's time for your child to pursue their post-secondary education, your Educational Assistance Payments (EAPs) can be used at any recognized post-secondary institution worldwide.

Getting started with Your RESP

The 2007 Federal Budget made the following changes regarding Canada RESP:

1. The $4,000 limit on annual RESP contributions was eliminated;
2. The lifetime RESP contribution limit was increased to $50,000 from $42,000;
3. The maximum annual amount of Basic CESG that can be paid in any year was increased to $500 from $400 (and to $1,000 from $800 if there is unused grant room from previous years). The lifetime CESG for each child is still $7,200.
4. The students can access up to $2,500 of their income and grants for each 13-week semester of study.

The new RESP rules will benefit those families enormously who can make a lump some Canada RESP contribution up to $50,000 per child when their children are still young. Please talk to a RESP representative to see how you can benefit most from the new Canada RESP rules.