Children's Plan in Ontario

There is currently no annual RESP contribution limit. However, the lifetime contribution limit is $50,000 per beneficiary across all RESP accounts established for that beneficiary. Government grants and designated provincial education savings benefits generally do not count toward the $50,000 contribution limit.

The Canada Education Savings Grant is a federal government incentive that can add money to an eligible child's RESP. The basic CESG generally provides 20% on the first $2,500 contributed each year, which can provide up to $500 of basic CESG per year. Eligible lower- and middle-income families may receive additional CESG on part of their contributions. The maximum lifetime CESG is $7,200 per eligible beneficiary, including additional CESG amounts.

The Canada Learning Bond is additional federal education savings assistance for eligible children from lower-income families. An eligible child may receive an initial $500, followed by $100 for each additional eligible year, up to a lifetime maximum of $2,000. You do not have to make personal RESP contributions to receive the Canada Learning Bond. Eligibility depends on factors including family income and family size.

No. Unlike an RRSP, money you contribute to an RESP is not deductible from your taxable income. However, investment earnings can grow inside the RESP without being taxed annually while they remain in the plan.

Your original RESP contributions can generally be returned without additional income tax because they were made with after-tax money. Government grants and investment earnings are generally paid to the student as Educational Assistance Payments (EAPs) and are taxable income to the student. Because many students have relatively low taxable income while attending school, the actual tax payable may be low or even zero depending on their circumstances.

RESP funds can help with reasonable costs associated with eligible post-secondary education. Depending on the circumstances, this can include tuition, books, school supplies, tools and equipment, transportation, rent or accommodation, and other reasonable education-related expenses. The beneficiary must generally be enrolled in a qualifying post-secondary educational program before Educational Assistance Payments can be made.

An RESP does not necessarily become useless if the original beneficiary does not pursue post-secondary education. Depending on the type of RESP and the circumstances, you may be able to keep the RESP open in case the beneficiary studies later, change the beneficiary, transfer funds to another eligible RESP, withdraw your original contributions, or potentially transfer eligible accumulated income to an RRSP, subject to specific CRA rules and limits. Government grants that cannot be used by an eligible beneficiary may need to be returned to the applicable government program. RESPs can generally remain open for many years, giving families flexibility if education plans change.

In many situations, yes. RESP rules allow beneficiaries to be changed, although the tax and grant consequences depend on the type of RESP, relationship between beneficiaries and their ages. Special rules can apply to family RESPs and transfers, so the change should be reviewed before it is completed.

An adult can generally open an RESP and name an eligible beneficiary. The person who opens the RESP is called the subscriber, while the person whose education the account is intended to support is called the beneficiary. Parents, grandparents and other individuals may therefore be able to establish an RESP, subject to the plan and registration requirements.

Yes. A beneficiary can have more than one RESP, including plans opened by different family members. However, the $50,000 lifetime contribution limit applies to the beneficiary across all of their RESPs combined, not separately to each account.

Starting earlier gives investments more time to potentially grow and can make it easier to take advantage of available government education savings incentives over several years. However, families who start later may still be able to receive unused CESG room, subject to the program rules. The best contribution strategy depends on the child's age, available grant room, family budget and investment objectives.

Investment options depend on the financial institution and RESP provider. Depending on the account, choices may include mutual funds, segregated funds where available, GICs, savings products, stocks, bonds and ETFs. The appropriate investment mix depends on factors including the beneficiary's age, time until post-secondary education, investment objectives and risk tolerance.

No. An RESP is the registered account structure; the investment performance depends on the investments selected within the plan. Some investments can fluctuate in value and returns are not guaranteed. Families should select investments based on their objectives, time horizon and tolerance for investment risk.

Smile Insurance can help you understand RESP contribution strategies, available government education savings benefits and investment options based on your family's goals. We can help you review your child's age, available CESG opportunities, potential Canada Learning Bond eligibility, provincial grant eligibility where applicable, contribution strategy, investment time horizon, risk tolerance, and individual and family RESP options. Government grants, eligibility requirements, contribution limits, tax rules and investment options may change. Eligibility is determined under applicable federal and provincial program rules. Investment values may fluctuate and past performance does not guarantee future results.

Currently, Ontario does not offer a separate provincial education savings grant that is deposited into an RESP. Ontario families may still qualify for federal RESP benefits including the Canada Education Savings Grant (CESG), Additional CESG, and Canada Learning Bond (CLB). Ontario students may later qualify separately for programs such as OSAP, depending on their circumstances. Using money from an RESP does not, by itself, reduce the amount of OSAP a student can receive under Ontario's current guidance.