RESP – Individual and Family Plans – Updated 2013

by Mike Holman

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There are two types of resp accounts that you can have: individual and family. This post will outline some of the rules and differences of these account types.

RESP Book

Buy The RESP Book on Amazon

Individual Plan RESP

Individual plans can only have one named beneficiary. The beneficiary can be any individual named by the subscriber including the subscriber (Individuals can open RESPs for themselves). There are no age restrictions on this type of account, however CESG and other grants can only be paid to beneficiaries under the age of 18. The beneficiary on the account can be replaced by anyone else but if the new beneficiary is not blood related to the subscriber then any CESG (grants) have to be repaid. The last contribution date is the end of the 21st year of plan’s existence. Plan has to be collapsed during it’s 36th year.

Family Plan RESP

Family plans can have one or more beneficiaries. The beneficiaries must be connected to the subscriber by blood or adoption. This includes children, grandchildren or siblings of the Subscriber, either by blood, adoption, or marriage. The beneficiaries must be under 21 years old when named.  Beneficiaries can be removed or added anytime during the life of the plan.

If there is more than one beneficiary then the contributions have to be allocated to each beneficiary. For example if you have twins you might set the allocation at 50% for each child. If you have two kids that are different ages and you don’t set up the resp until the second child is born then you might choose to allocate more of the contribution to the older child in order to catch up on their contributions.

One rule which is always in effect for both types of plans is the maximum lifetime grant amount of $7200 per child. If you have a situation where both of your children have received the maximum grant and you want to transfer some of the contributions to a different beneficiary then you will lose the corresponding grants. This also applies to transfers with individual accounts as well.

So which is better? Family or Individual?

If you only have one child then the individual account is the obvious answer. For multiple child families it may appear at first glance that family accounts are more flexible than individual accounts however in fact they are pretty much the same thing, because the rules allow transferring money between any type of accounts. In case one of your kids doesn’t go to school, it doesn’t matter whether you have your kids in a family account or individual accounts since you are allowed to transfer money to the kid(s) who are still going to go to school in either case. I would suggest that family plans are slightly better if you have more than one child mainly because it will save on account fees and it might simplify the paper work a bit. Bottom line is that it doesn’t really matter so pick the cheapest and most convenient option.

Tip – If you have one child, you can set up a family account for future expansion

Multiple RESP accounts for same beneficiary – Communicate!

When setting up a RESP for a child, it’s important to communicate with other relatives and friends who might have also set up a resp for the same beneficiary. The government will add up all the contributions attributed to each beneficiary in order to enforce the various grant limits and maximum amounts. This applies to any RESP accounts set up for a beneficiary – it doesn’t matter if they are set up in different financial institutions by different subscribers.

You might be wondering why someone would set up an RESP for a relative (ie nephew) rather than give the money to the parents to set up an RESP? For one thing, if that parent is not as financially sound as you are and perhaps you don’t trust them, you might not want to give them the money directly for fear that they won’t set up the RESP account or maybe they will withdraw the money before the child goes to school. Another scenario is if the child doesn’t go to school, the money goes back to the subscriber, so you might want to make sure you get your money back in that case.

More detailed RESP information

Check out the RESP rules page for a list of more detailed RESP articles on this site.

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Want to learn more about RESPs? Buy The Book:

Resp-Book

The RESP Book: The Simple Guide to Registered Education Savings Plans

Everything you need to know about RESPs.

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{ 55 comments… read them below or add one }

51 Jason

I thought I understood RESPs, until I happened to mention to TD that I was considering transferring my family plan RESP to them. The bank rep at TD told me that I may not be getting all of the CESG that I am entitled to. My family RESP was originally setup back in 2006 when my son was born, to account for his sibling that would eventually come along. So when his sister was born in 2008, I didn’t think any paperwork was required at that point. So my monthly $100 contribution has been earning $20 monthly in CESG, and apparently all of this money is earmarked for my son, not my daughter? The TD rep said that because I have two kids, I should be earning $40 monthly in CESG for every $100 contribution. But I can’t find anything at the CRA website to confirm or deny this. Any thoughts? If this is infact the case, would the government give me the past 4.5 years of missed CESG? I highly doubt it, but it doesn’t hurt to ask I suppose!

52 Peter B

As far as I know…
No, you do not get 40% for two kids (you get 20% of contributions for each, so if you doubled to $200, you would get $40). With two or more kids, you could have changed plan to a family plan which allows you to direct funds to the other child if one does not go to college / university but you still only get 20%. So you are not missing any money. You can open a plan for your daughter (to catch up for her) or open a family plan at this point.

53 Pete

I’m currently expecting my second child and would like to open up an RESP for them as well. My first child already has an RESP account set up for him at TD. However, for my second, I’d like to set up their RESP at a different financial institution. In that case, would I just set up an individual plan so that my 2nd child is the only beneficiary of this second account?

Thanks

54 Sandra

I set up a family RESP for my children about 20 years ago. At that time, a friend of mine contributed $100.00 monthly on top of my own contributions. My children are now 22, 24 and 25 so do not get any more grant money from the government. I do, however now have a six year old grandchild. Is there any way that I could add her to this plan so that she can take advantage of the government grants as my friend from many years ago still continues that $100.00 monthly contribution?

55 nabeelj

I have a family RESP with kids aged 5, 3 & 0. I’ve been thinking about how to allocate whatever contributions I’m able to make each year . I’ve come up with this:

1. Maximize grants that can not be carried forward for all children (i.e. add’l CESG).
2. Maximize available grants for oldest child (i.e. current year basic CESG and maximum allowed carried-forward CESG).
3. Same as #2 for next child, and so on.

My thinking for #2 is that the oldest child has the least amount of years remaining to use up their $7,200 lifetime grant room. I don’t know what my future cash flow will look like, who knows if I’m broke every year till the oldest turns 19 then all of a sudden get a massive inheritance – if that happened, I’d have “wasted” the unused grants. So, while there’s no downside to maximize the older child’s contribution room first (except for the need to track it), there is a potential upside.

For example, if I had $6,600 to contribute, and $1000 unused CESG carried forward from previous years for each child, most people would likely contribute $2,200 for each child. However, per above, I would:

1. Contribute $500 per child to get the 10% add’l CESG ($50) that I qualify for in 2014 and $100 in basic CESG.
2. Contribute $4500 towards oldest child to maximize the remaining allowed $900 CESG.
3. Contribute $600 to next oldest child to get $120 CESG.

Does this make sense?

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