Family RESPs AND Adding New Beneficiaries – Reader Question

by Mike Holman

Reader Holly sent an interesting RESP question via email:

We have RESPs in a family plan for our two older children (13 and 15).  I’m not pleased with the investment options here, but since the eldest is so close to college and it’s not a significant amount of money, I don’t think we’ll transfer institutions.

We just had a baby and I’d like to set up an RESP at TD Bank with the e-series funds since there is so much time before she’ll be on to higher education.

I’m confident that my eldest child will go on to college, but we’re not so sure about the middle child.  Hopefully, the baby will choose when the time comes to go on to college/university.

My question is regarding how to set up the plans as family plans at differing institutions.  Can you do that?  Is that the best idea?  What would you suggest given the huge age gap between our kids to ensure that we can save and transfer any unused dollars between the children.

First off all – You can’t set up a family account between institutions.

You can however, share RESP money between individual accounts for siblings as long as the subscriber is the same for both accounts.  This isn’t all that practical between institutions though.

What I would suggest is to think about the following:

  1. Set up an individual RESP for your new baby at TD as you planned.
  2. Add the new baby as a 3rd beneficiary for your existing family plan RESP.  That  way, if there is still money left in the family plan in 17 years, they can utilize  it without penalty.  The account can be kept open for 35 years after the year it was started.
  3. Another idea is to consider paying out some of the middle child’s RESP money to the older child when they start school.  This could be problematic since only $7,200 of RESP grants can be paid to one beneficiary, but it’s something to think about.  This money could be used for the older child or kept in a TFSA or non-registered account for the middle child.  The idea is to reduce the risk that if the middle child and the baby don’t go to school, extra penalties might have to be paid.

Suggestion #3 is very debatable, but in my opinion there is a lot to be said for getting money out of an RESP account without penalty when given the opportunity.

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