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RESP FAQs
Click on a question below for detailed information.
What is an RESP?
An RESP is a Registered Education Savings Plan. It allows a contributor to the plan (the "subscriber") to save money - tax deferred - until the funds are needed to pay for a child's (the “beneficiary’s”) post-secondary education.
With the Canada Education Savings Grant (CESG), the federal government has made a commitment to help families who are saving for a child's post-secondary education. The federal government can contribute an additional 20% of your annual contribution, up to a maximum of $500 per calendar year per eligible child, up to the end of the calendar year in which the child turns 17 years of age.
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What investment options are available as RESPs?
The options available for RESPs include BMO Intuition™ RESP Portfolios, BMO Mutual Funds and BMO GICs. All can be held as RESPs.
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What are the BMO Intuition® RESP Portfolios?
The BMO Intuition® RESP Portfolios are five professionally managed portfolios, each composed of specially selected BMO Mutual Funds.
Depending on your specific goals, time horizon, risk tolerance, and the age of the beneficiary, you’ll be matched with a specific investment portfolio designed to offer the best possible return, given your personal investment objectives.
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What are the minimum contributions I can make to a BMO RESP?
The minimum lump sum investment is $1,000 per BMO Intuition® RESP Portfolio or $500 per mutual fund or GIC.
A Continuous Savings
Plan makes it easy to start saving. The minimum contribution is $100 per BMO Intuition® RESP Portfolio or $50 per mutual Fund or GIC. Arrangements can be made to have your contributions transferred from your bank account directly into the RESP.
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As the subscriber, do I receive any tax credits or deductions?
Neither RESP contributions nor any interest paid on loans used to make contributions are tax deductible.
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Who qualifies for the CESG?
To qualify for the CESG, several beneficiary requirements must be met.
- Contributions for an eligible beneficiary must have
been made by December 31st of the year in which the beneficiary turns 17
- The beneficiary must be a resident of Canada at the
time of the contribution
- The beneficiary must have a valid Social Insurance Number (S.I.N.)
Additional Restrictions for 16 and 17 year olds: To qualify to receive the CESG: a minimum of $2,000 in RESP contributions must have been made before the year the beneficiary turns 16. Alternatively a minimum of $100 in annual contributions must have been made in any four years before the year the beneficiary turns 16. In both cases, the contributions have not been withdrawn from the RESP.
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How much CESG can be added to my BMO RESP?
The amount of the
CESG is based on your family income, and can change over time as your family
income changes. No matter what your net family income is, the CESG provides at least 20 cents for every dollar on the first $2,500 of annual RESP savings made on behalf of a child.
Depending on your family income, your child could receive additional CESG on RESP savings that you make after 2004 on behalf of a child:
- If your net family income is below $37,178*, the
grant will be 40 cents for every dollar on the first $500 you save in your
child’s RESP each year
- If your net family income is between $37,178* and $74,357*, the grant will be 30 cents for every dollar on the first $500 you save in your child’s RESP each year
Your net
family income is reported on your Canada Child Tax Benefit statement (commonly
known as “baby bonus”, or “family allowance”) that you receive from Canada
Revenue Agency each July.
You may be eligible to receive additional grants:
- The Government of Canada introduced the Canada
Learning Bond (CLB) in 2005 for modest-income families. For families who
qualify, the CLB pays $500 the first eligible year and $100 each additional
year through the 15th year of the child
- The Alberta Centennial Education Savings (ACES) Plan pays families of children in the Province of Alberta $500 for newborns since 2005, and $100 for all eligible 8, 11 and 14 year olds
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Does the CESG affect how much I can contribute to my BMO Intuition RESP?
The maximum lifetime contribution to an RESP is $50,000 per child . Any CESG contribution you receive does not use up any of the RESP contribution room. If you maximize all of your RESP contribution room and the CESG, each beneficiary can accumulate up to $50,000 in principal, $7,200 in CESG, plus earned income.
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How is the Canada Education Savings Grant (CESG) added to my BMO Intuition RESP?
HRSDC provides the CESG directly to BMO Investments Inc. BMO Investments Inc. deposits the CESG to your BMO RESP.
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What happens if a subscriber needs to withdraw money from a Registered Education Savings Plan?
A subscriber can withdraw an amount less than or equal to his/her total contributions, at any time without tax consequences. If an RESP has received the CESG and the beneficiary is not enrolled in a post-secondary program, 20% of the amount withdrawn must be returned to the government (up to the total amount of CESG in the RESP). CESG-eligible contributions are withdrawn before CESG-ineligible contributions.
The redeemed amount cannot be returned to unused contribution room.
If the income is withdrawn, then there will be tax implications.
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What post-secondary schools can the beneficiary attend?
- Full-time and part-time studies at universities as
well as Community, junior, vocational and technical colleges in Canada
- Many universities outside Canada, if enrollment in course lasts at least 13 consecutive weeks
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How is the money withdrawn from an RESP when the beneficiary needs it for school?
Proper documentation, such as a Bursar's Certificate, must be provided as proof of enrollment in a qualifying program at a post-secondary institution. The subscriber arranges for Educational Assistance Payments to be made to the beneficiary.
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Once the beneficiary enrolls in post-secondary education and starts making withdrawals, how is this money taxed?
Registered Education Savings Plans are made up of contributions and earnings.
- The portion made up of contributions is not taxed
when withdrawn for post-secondary education needs. This type of withdrawal is
known as a Post-Secondary Education (PSE) withdrawal
- The portion made up of earnings, consisting of accumulated income earned on the contributions, the CESG and the growth of the CESG, is taxed in the hands of the beneficiary. This type of withdrawal is known as an Educational Assistance Payment (EAP) withdrawal. However, since the income tax rate of most beneficiaries is generally low, little or no tax will likely need to be paid by the beneficiary
When completing an RESP withdrawal for post-secondary education purposes, the Subscriber can choose to withdraw from the plan’s contributions (PSE) or earnings (EAP). Generally, it is recommended to complete EAP withdrawals first in order to use the CESG while it is available. Once the earnings, including the CESG, have been withdrawn from the plan, payments will be made from the plan’s contributions.
A T4A will be sent to a beneficiary for the tax year in which an EAP was processed in their account.
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What happens to the money in an RESP if the beneficiary decides not to attend a post-secondary school?
Within a Family Registered Education Savings Plan, you can designate another qualifying beneficiary(ies).
- Other beneficiaries can share in the accumulated
savings and up to $7,200 of CESG per beneficiary
- If there is no other beneficiary, contributions are
returned to the subscriber and the total CESG (but not accumulated income on
the CESG) must be repaid. For information on withdrawal of the investment
income, see "Accumulated
Income Payment (AIP) "
Within an Individual RESP, you can name another beneficiary.
- However, to be eligible to keep the CESG, the
replacement must be under age 21, plus one of following:
- Brother/sister of former beneficiary
- Both former and replacement beneficiaries are
related to subscriber by blood relation or adoption
- If
no other beneficiary can be named, contributions are returned to subscriber and the
total CESG must be repaid. For information on withdrawal of the investment
income, see "
Accumulated Income Payment "
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What happens if there is money remaining in an RESP after the beneficiary completes his/her education or the holding period reaches 25 years?
If the RESP has completed its 25th year, it must be terminated. The same options and rules apply as when a beneficiary does not attend a post-secondary institution.
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I have two children in the same plan (Family Plan). What happens if only one pursues post-secondary education?
Under a Family Plan, the accumulated savings plus investment earnings and CESG may be shared with any other beneficiaries, up to allowable maximums. In this case, the CESG attributed to the child who will not pursue post-secondary education can be directed to your other child as Education Assistance Payments (EAPs) when they enroll in a post-secondary school. This may cause the total CESG for that child to exceed the maximum of $7,200. If that happens, any excess CESG over $7,200 must be returned to the government, but the income earned on the excess CESG remains in the plan.
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Can a beneficiary delay entry into a post-secondary school for several years?
Yes, but not indefinitely. The maximum life of an RESP is 25 years and must be terminated before the end of 25th year following the year the Registered Education Savings Plan was opened.
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Can I make transfers between RESPs?
Most transfers may be made on a tax-free basis from one RESP to another. To avoid application of the penalty tax for over-contributions or repayment of the CESG, the following rules must be observed:
- There must be a common beneficiary between the
originating plan and the receiving plan; or
- A beneficiary under the receiving plan must be under
21 years of age, and a brother or sister of a beneficiary under the
originating plan
- The subscriber must sign a Transfer Request Form
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S.I.N. Specifics
In order to open an RESP, you, the subscriber, are required to provide your S.I.N. In order to receive CESGs, the beneficiary must have a valid S.I.N.
Subscribers must provide their S.I.N. and the S.I.N. of all beneficiaries (Family Plan) before the plan can be registered as an RESP with Canada Revenue Agency. We encourage you to apply for a S.I.N. on behalf of your child as soon as possible to take advantage of the benefits of RESP investing. There is no charge for obtaining a S.I.N.
It takes approximately three weeks to process a S.I.N. application.
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