RESP contribution rules for 15- 16- and 17-year-olds

by Mike Holman

Many new parents take their newborns home from the hospital with the best of intentions to start an RESP account for their screaming bundle of joy.  The problem is that sometimes life interferes and maybe that educational savings account never gets set up.

Now the little screamer has grown up into a sullen teenager and you would really like to make sure you can afford to send her to a school in another city – far, far away.  Can you still make RESP contributions and get some free government grant money to make your dreams come true?   Read on to find out.

There are no special restrictions on RESP grants for kids in the years from when they are born to the year when they turn 15 years of age.  There are however, grant eligibility restrictions for kids during the years when they are turning 16 and 17.

RESP contributions made for beneficiaries in the year they turn 16 or 17 are eligible for a grant only if at least one of the following conditions is met:

  1. At least $2,000 must have been contributed to, and not withdrawn from, an RESP for the beneficiary before the end of the calendar year the beneficiary turned 15 OR
  2. At least $100 must have been contributed to, and not withdrawn from, an RESP for the beneficiary in each of any four years before the end of the calendar year in which the beneficiary turned 15.

Please note that only one of these conditions has to be met.

The difference between these two conditions is that the first one can be met by contributing the $2,000 over one or more years. The second one involves making contributions of at least $100, in at least four different calendar years.

It should be noted that the year a child turns 17 is the last year they can be eligible to receive RESP grants.

What this means

If you open a child’s first RESP in the year he turns 16 or 17 years of age, no grants will be paid on contributions. It is too late.

For a child to be eligible for RESP grants in the year she turns 16 or 17, either of the previously mentioned conditions must be met.

How to ensure your child is eligible for grants

The last year you can open a first RESP for a child and expect to receive any grants is during the year when the child turns 15. You need to contribute at least $2,000 that year in order for the child to be eligible for grants in the years he turns 16 and 17.

Just to clarify – The ages mentioned previously refer to the calendar year in which the child turns the appropriate age. If you have to make a contribution in the year the child turns 15, this means the contribution has to be made at some point between January 1 and December 31 of that year. In fact, the child might be 14 at the time of contribution if it takes place before the child’s birthday.

The last year you can start an RESP, make four annual $100 contributions and still be eligible for grants when the child is 16 and 17 is the year the child turns 12.

These age rules are important to know because if your child turns 15 this year and you are still thinking of opening an RESP for them, you need to act soon. It is still worthwhile to open an RESP in the year they turn 15. If you contribute $5,000 per year in the years they turn 15, 16 and 17, you will receive at least $3,000 in RESP grants.

Let’s look at an example of each rule

1) A total of $2,000 must be contributed towards the child’s RESP by the end of the year in which the child turns 15 years old.

Steven turns 15 years old in 2011. His parents decide to open an RESP account and contribute $5,000 per year for three years until Steven is not eligible for RESP grants anymore.

His parents contribute $5,000 in 2011, which is the year Steven turns 15. This means that the eligibility criteria for grants in the years he turns 16 and 17 is met. He will receive the full grants in the years where he turns 16 and 17.

Note – the minimum of $2,000 contributions don’t have to be made in the year the child turns 15.  They can be made anytime up to the end of the year where the child turns 15.

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2) At least $100 must have been contributed to the child’s RESP account in at least four different years prior to the year he turns 16 years old.

Susie is turning 16 in 2011. Her parents have an RESP account for her and want to know if she is still eligible to receive grants this year and next year when she turns 17.

Her parents check their statements and determine how much they have contributed in the past:

  • 2002 – $50
  • 2004 – $500
  • 2005 – $100
  • 2006 – $200
  • 2008 – $500 – This amount was withdrawn.
  • 2009 – $100
  • 2011 – The year Suzie turns 16

As you can see, there are four different years where at least $100 was contributed to the RESP account and not withdrawn. This condition is met and Susie will be eligible for RESP grants in the years she turns 16 and 17 years of age.

Conclusion

Starting a last minute RESP is not something that most people plan on.  However, it’s a lot better late than never.  If you contribute the max for the last three eligible years, you can still receive 42% of the total available grants.  At that point, you are likely savings for the child’s schooling anyway, so it’s basically free money.

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