1. Who can contribute to an RESP?

Anyone can contribute to an RESP. Immediate family, grandparents, uncles and aunts and even friends of the beneficiary can all contribute. But it’s important to note that the source of the contributions will have a bearing on the type of RESP account that is opened on the beneficiaries’ behalf. There are two different types of plans available from Manulife Mutual Funds, family plans and individual plans:

  • Family – There can be more than one beneficiary as long as they are all under 21 when named as a beneficiary and related to the donor by blood relationship or adoption. A blood relationship includes: son, daughter, brother, sister, or grandchild. To be eligible to receive additional RESP incentives over-and-above the Basic CESG (the Additional CESG and the Canada Learning Bond) all beneficiaries in the plan must be siblings
  • Individual – One person is the beneficiary and does not have to be related to the subscriber

There is no annual contribution limit and the lifetime contribution limit per beneficiary is $50,000 as of 2007.

CRA            HRSDC

2. Is the money contributed to an RESP tax deductible?

No. RESP contributions, or any interest owed on money borrowed to contribute, are not tax deductible. However, any investment income earned within the RESP will grow free of tax until a beneficiary withdraws the funds to pay for their post-secondary education (an educational assistance payment “EAP”). When an EAP is received, it is taxed at the beneficiary’s marginal tax rate.

3. What government incentives does Manulife currently offer?

Manulife currently offers the following incentives to all you to better save for the beneficiary’s education:

  • The Canada Education Savings Grant (CESG): Through the CESG, the government adds 20 per cent to the first $2,500 of annual contributions made to all RESPs of an eligible beneficiary for a maximum grant of $500 per year up to a maximum grant of $7,200 per beneficiary
  • The Additional CESG: For the additional CESG, the government adds over and above the Basic CESG, either 10 or 20 per cent on the first $500 contributed each year provided that the primary caregiver of the RESP beneficiary is a recipient of the Canada Child Tax Benefit
  • The Canada Learning Bond (CLB): The CLB is a bond, or grant, of $500 plus $100 per year up to age 15 that is available to children born after December 31, 2003, whose primary caregiver is eligible to receive the National Child Benefit Supplement
  • The Alberta Centennial Education Savings (ACES) Grant: Open to residents of Alberta only, the Alberta government adds an ACES Grant of $500 for every child born in Alberta on or after January 1, 2005. In addition, they will also contribute an additional $100 each when the beneficiary turns 8, 11 and 14, provided certain conditions are met

4. Can a subscriber be changed or replaced on an RESP account?

Yes. In the case of separation or divorce, a spouse or former spouse may replace the original subscriber on an RESP as a result of a court order or written agreement.

5. Can a change be made to the original beneficiary?

Yes, the RESP allows for a beneficiary to be changed or replaced at any time, subject to certain provisions.

6. How can the RESP proceeds be withdrawn when the beneficiary is attending a post-secondary educational institution?

If the beneficiary is enrolled in a qualifying post-secondary educational institution, the beneficiary will be entitled to receive an Educational Assistance Payment (EAP) from the RESP. To make an EAP withdrawal or a withdrawal of capital for school purposes, Proof of Enrollment must be submitted to Manulife along with a request for withdrawal.

7. If If the beneficiary does not go on to post-secondary education, what happens to the proceeds in the RESP?

Any income earned in the RESP can be transferred into the subscriber’s RRSP or spousal RRSP as an Accumulated Income Payment (AIP) provided they have the available contribution room (up to a maximum of $50,000). There are, however, some stipulations involving the transfer:

  • The RESP beneficiary (ies) must have reached the age of 21 and are ineligible for educational assistance payments
  • The RESP account must have been held for at least 10 years

Any government incentives not utilized will require repayment to the government.

8. When must an RESP be terminated?

Contributions to an RESP can be made up to the end of the 31st year after the plan is entered into for all plans, and in addition, before a beneficiary’s 31st birthday for a family plan. The RESP must be terminated on or before December 31st of the plan’s 36th year or by the end of February of the year after the first Accumulated Income Payment (AIP). The age of the beneficiary is irrelevant. Thus, it is possible for a beneficiary to take time off to work or travel before beginning their post-secondary education.