Comments on: RESP – A Comparison to Non-Registered Accounts

By: Mike

Mike — Fri, 16 Oct 2009 02:56:21 +0000

Hi John – thanks for the comment.

I did not make that assumption – I assumed the non-registered account would be in the parent’s name. The idea is to compare with the resp where the money is always owned by the parent until it is given to the student.

By: John D

John D — Fri, 16 Oct 2009 02:31:47 +0000

Under scenario #4, have you assumed that the non-registered account would be in the child’s name? If so, the taxable portion capital gains would not be attributable to the parent during the child’s younger years (i.e. 0 to 18 years). Dividends would be taxed in the parent’s hands as they are attributable. Since the capital gains would be taxed in the child’s hands and they get the personal tax amount free each year, it would be safe to say that a strategy could easily be built to get tax-free capital gains. Would this not save an additional $7,470 on the non-RESP acct?

John

By: Four Pillars

Four Pillars — Tue, 03 Feb 2009 16:15:12 +0000

Ahhh – that makes sense now.

From what I understand about informal trusts – any capital gains taxes have to be paid by the owner of the trust ie a parent who has an ‘in trust for’ account for their child.

I’m not sure about a formal trust – maybe the trust itself pays the tax? You should really talk to a professional about this one – or the administrators of the trust.

One thing I know for sure is that the fact the money is going to an RESP has nothing to do with the trust tax issues.

By: PTR

PTR — Tue, 03 Feb 2009 15:43:16 +0000

Yes, the tax on withdrawal from the trust.

By: Four Pillars

Four Pillars — Tue, 03 Feb 2009 15:14:58 +0000

PTR – there are no tax implications to a contribution to an RESP.

Are you referring to the withdrawal from the trust?

By: PTR

PTR — Tue, 03 Feb 2009 14:40:33 +0000

OK, I’ll try to clarify. Have a situation where a family trust is contributing to an RESP for a minor (likely to a trust). Is the contribution taxable? If so, who is taxable – the contributing trust, or the minor?

By: Four Pillars

Four Pillars — Sun, 01 Feb 2009 13:03:06 +0000

PTR – still not sure what you are talking about. Sorry.

By: PTR

PTR — Sun, 01 Feb 2009 04:48:33 +0000

Sorry, that should have read “tax” not interest. Thanks.

By: Four Pillars

Four Pillars — Fri, 30 Jan 2009 00:40:04 +0000

PTR – I don’t understand your scenario.

What interest are you talking about? Tax on the initial contribution? Huh?

By: PTR

PTR — Thu, 29 Jan 2009 23:53:40 +0000

Good discussion – I have a question – if you are contributing to an RESP from a Trust, who pays interest on the initial contribution? The contributing trust wouldn’t as it is set up as a payable at year end which eliminates tax in the hands of the trust. If the beneficiary is either a minor, or a trust established for a minor (both cases under a RESP) I would assume that the minor, or the minor’s trust would have the liability for the tax on the initial contribution – correct?