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

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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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{ 55 comments… read them below or add one }

1 telly

I have to admit, I sort of breezed through this as I’m not concerned with RESPs at this point but I found the little bit about contributing to relatives / friends kids very interesting. I’ve always preferred to give gifts of money for university savings for my friends kids but I also wonder if it really ends up there…

Good to know!

2 FourPillars

Telly – I’m devastated that you don’t read my every word on this fascinating subject :)

Actually even I find it a bit boring at times…

Mike

3 AF

I’m glad you addressed nosy relatives at the end of this post. It is one of my big concerns. .

Do you know of a way to legally prevent a relative from doing this? (also setting up an RESP) I have a baby due in Dec and this has been a huge source of contention, especially since my mother is a financial advisor/insurance broker and sets up these things for a living.

Is there even a way to find out if someone has set one up for your child besides waiting for the gov’t to notify me that I’ve gone over the annual limit?

Thank you so much!!!

4 FourPillars

AF – that is a problem that most people would be happy to have.

The only way I can think of to prevent anyone from setting up an resp is to not give them your child’s SIN number (it’s mandatory).

You can find out if there are other accounts set up by calling the HRSDC – they can see how much is being paid out in grants.

You should try to find out how much your relatives are contributing and then contribute accordingly.

Keep in mind as well, there is no annual contribution limit. There is a maximum grant that can be paid out in a single year but any contributions on top of that won’t get a grant.

Hope this helps,

Mike

5 Y HAT

Any ideas on how to distribute funds to your children under a family plan? How does one calculate how much “belongs” to the first child vs. his/her younger sibling?

6 FourPillars

Hi Y Hat – when you have a family plan you have to allocate the contributions so that a certain percentage goes to each child.

The resp provider will send this info to the government so both will have this info in their systems. When you do a withdrawal you can specify which beneficiary is getting the money.

Let me know if you need more info,
Mike

7 Pablito

AF: Actually, your mother will need your signature (parent or legal guardian) if she wishes to apply for the CESG to be paid into her plan. My mother did this and I remember her bringing over such a form for this purpose. I imagine if you don’t sign, she can still open the RESP, but won’t be able to fetch the grant… though I’ve not checked that.

Thinking about this, it seems a bit strange that there is not a similar form for the CRA granting permission to open the RESP in the first place. It would seem at least possible that someone could object to having the $50K lifetime maximum eaten up by other relatives plans, but that doesn’t appear to be considered looking at the paperwork.

8 Pablito

Four Pillars: In the post, while considering which plan is better you state: “however in fact they are pretty much the same thing because the rules allow transferring money between any type of accounts”.

Actually, in asking about this at the CRA (called back a few times even) I was told that transferring is a bigger deal than you might think. From what I gather, a transfer is an “all or nothing” type scenario. This surprised me as I had actually taken the time to download and read the transfer form and it had a section that at least suggested that a partial transfer is possible.

Worse still is that in doing so you would effectively be collapsing the plan from which you are transferring. In doing so, the grant and accrued interests will be evaluated for taxation and/or returned to HRSDC. I _think_ the most favourable scenario in this evaluation is blood related siblings, but I was told it was a case by case basis and that they could not specifically comment on my case (very typical: 2 kids aged 3 and 4) so I rather went away with the sense that some money would certainly be lost.

Frankly, I got some conflicting information the different times I called so would encourage anyone considering the “individual plans” option to inquire for themselves before going ahead.

This new (albeit somewhat unclear) information was enough to worry me into going back to the bank, closing the individual plans I’d already opened and opening a single family plan for my kids. Luckily, I had not yet contributed before I realised my “mistake”. In truth, the decision was made much easier after I got wind of the changes in the 2008 budget. The original limits is what pushed me towards the individual plans in the first place. I’d imagine the rules changes makes the family plan a no brainer for most people now.

9 Four Pillars

Hi Pablito – thanks for the great comments.

I’ve found the CRA to be pretty hit or miss.

If you transfer an individual resp to a family resp then the individual resp is not collapsed as long as the beneficiaries are blood related.

You’re right that the new rule about the longer age of the resp account (35 years) changes this decision. I definitely think a family account is a better option.

I’m going to do a followup post on the resp change and how it affects some of the ideas that I posted about here.

Mike

10 Pablito

Hi Mike: It is a bit academic now, but given the amount of time I’ve spent trying to get my head around all the confusion, I’m genuinely curious now…

Are you saying that I was misinformed about the transfer restrictions or was my mistake in letting them think I would transfer the first child’s individual RESP into the second child’s individual RESP? Is the key in transferring to a (new) family RESP?

11 Four Pillars

Pablito – I’ll do some more research to verify but I wasn’t aware of any restrictions between blood relatives.

12 Pablito

Thanks, but I’m not sure it is worth the effort. I was just asking out of curiosity. :)

13 Nazir

Hello,
I’m a Canadian Citizen living in the USA as a resident with two children who were born in the USA. Can my father (lives in Canada) setup an RESP on behalf of my two children and also be qualified for the yearly grant (I believe $400 for every $2000)?
Thanks!

14 Four Pillars

Nazir – no, he can’t. The kids have to be Canadian residents to qualify for the grant.

15 Nazir

So there is no other way? They have to be Canadian residents with a SIN? Or just a resident? We will eventually move to Canada and reside there so I’d like to find a way to take advantage of this plan. Our kids are 3 yrs old.
Thanks

16 Four Pillars

Like I said, they have to be Canadian residents. Otherwise no dice.

17 Annette

My dilemma is that my ex-spouse, who became the subscriber of the RESP after the death of his mother (the original subscriber) apparently took the funds and spent them, rather than allow one of his three children named as beneficiaries in the family plan access to some of the money for post secondary education fees. Is that legal? And what about the rights of the beneficiary, or does the child/student have any where the RESP is concerned?
This is really a tragic circumstance.

18 Four Pillars

Annette – the subscriber of the resp owns the money 100% so they can do whatever they like with it. The beneficiary has no claim to the money until it is given to them.

Given that there was a divorce involved you might want to check this out with a lawyer since the rules might be different in that case.

19 Annette

Thanks so much for your advice. Great website, by the way!

20 Phil Hogan

Hi

Quote from above “Family accounts have to be collapsed by Dec. 31 of 25th year after plan setup”

I was under the understanding that both individual and family plans could remain open until the 36th year…am I mistaken?

Thanks

Phil

21 Four Pillars

Thanks Phil – I need to update the post.

22 Mark Stirling

I have 3 kids. This year they will be 14, 19, 21.
19 & 21 are currently attending university.
14 year old looks like he will attend university as well.
I currently contribute 1768 per child per year.
My household income exceeds the bonus limits.
I have a few questions:
1) should I change my contribution allocations to more for the younger sibling since it appears my older siblings are not eligible for grants anymore?
2) What is the max I can contribute for my youngest sibling to take full advantage of grants?
3) Withdrawls – should I be taking withdrawls (at least the grant portion) for my older children soon so any taxible value is offset with their low current incomes.

thanks for your comments

Mark

23 Mike

Mark

#1 – You don’t get the grants for the older kids but you still get tax free earnings. It’s debatable if it is worthwhile to keep contributing for them.

#2 The most grants you can get in one year is $1000 (on a $5000 contribution). This is only available if you have enough contribution room.

#3 I would have assumed that you have already started withdrawals – at least for the oldest child. The goal is to empty the RESP by the time they finish – the earlier the better. Definitely try to minimize any taxes.

Mike

24 Zoe

Hi Mike!
First of all, love your blog! Very helpful information.
My question:

Husband and I have 3 kids together, and 1 from his previous relationship.
We are planning on opening a family plan for all 4 kids.
1. How do we set it out that each child receives X amount for their resp? Is the money pooled together in the family plan?
2. How long can you contribute to a family plan?
3. What if we open 4 individual plans instead? Any benefits to that?
4. How does a subscriber put a limit on how much a child can withdraw?

Thanks so much!

25 Roxanne

Thanks so much for your information. I have 3 children and after reading your information and that of others, would like to set up a family plan to cut down on the paperwork and costs involved. My question is what vehicles should I put my money in and should it be placed in a TFSA or RRSP?

Thanks

26 Mike Holman

Roxanne – The choice between an RESP and TFSA is up to you. I would learn as much as you can about both account types and decide. In my opinion, unless you think there is some reason your child isn’t likely to use the RESP, the 20% RESP grant is hard to beat.

You can have any investments in your RESP that you can have in an RRSP – GICs, mutual funds etc.

The simplest, safest RESP you can have is a GIC RESP which is available free at any big bank. Here is a link to the TD Canada Trust version.

Make sure you only buy plain GICs – don’t buy any “market-linked” products.

http://www.tdcanadatrust.com/resp/resp_gics.jsp

27 Doru Sandor

Hi Mike,

Firstly, I want to thank you for taking the time to share your knowledge with us. This article was very useful for a financial rookie like myself.

You seem to be familiar with Questrade, so maybe you can answer my questions. Last week I opened a Family Plan RESP with them and from what I remember, nowhere on the account opening forms I was asked how the contributions are going to be allocated to each beneficiary. Do you know how I can tell Questrade to do this allocation? I could not find any option on their website.

My second Question is that I plan to contribute more than $2,500 per kid (but less than $5,000) initially and therefore I want to get the CESG grant for the last year as well. Will Questrade automatically apply for the last year’s grant?

My third Question is that I qualify for the Additional CESG. Will Questrade apply for it automatically?

And my last question is if you know when Questrade is going to apply for the CESG grants? Like, is there a specific month of the year or they will apply as soon as I transfer more money in my account?

I tried to ask Questrade directly these questions but after being on hold for more than 20 minutes I gave up. It seems that they have some software issues and their held desk is very busy right now.

Thank you in advance,
Doru

28 Kayla

Hi Mike,

I’m in a situation where my son’s paternal grandparents have opened an account for him. They came to me to sign the form for the grants and I said that I wouldn’t at least until they talked to my financial advisor about the plan I already have open for him. I have an individual plan, he’s my only child and his father and I aren’t together. I had planned on contributing the maximum amount for grants each year.

They didn’t even attempt to contact my advisor and went ahead and opened an account in his name anyways. They opened a scholarship trust fund. I don’t fully understand what it is but I don’t think it would be my preferred RESP. The lack of communication is frustrating me. I got a letter from the Canadian Scholarship Trust Fund company that informed me it was open and reminded me it was my legal responsibility to keep within limits. However when I called they told me I had no access to it at all, I can’t find out how much is in there nor can I do anything about it.

This is a control thing with them. I’ve been nothing short of great to them and I’m frustrated that they can’t even communicate this with me. Makes me wonder what else they’re going behind my back on.

Thank you.
Kayla

29 Mike Holman

Hi Kayla.

In order to open up an RESP account for a child, you have to be either the custodial parent or get permission from the custodial parent.

On the RESP account setup form (sde 0071):

http://www.hrsdc.gc.ca/eng/learning/education_savings/publications_resources/promoter/forms/sde0071/SDE0071.pdf

Part B has a section that has to be filled out by the custodial parent if they are not the account subscriber.

Is your ex-husband a custodial parent or legal guardian as well? If yes, then they might have gotten him to sign the form and it is perfectly legal.

Since the letter from the scholarship company came to you – perhaps you were listed as the custodial parent. Maybe they forged your signature or just left it blank?

If that’s the case, I would make a copy of the letter and mail it to the RESP company indicating that you are the custodial parent and did not give permission to open up the account.

You can also send a similar letter to the grand parents and ask them to shut the account down.

30 Nicole

Hi Mike,
We currently have 2 individual RESP’s for my 5 and 3 year olds with Universitas. We have yet to open one for my 1 year old.
We are trying to decide whether to stay with Universitas, as they offer a slighty better return, but I think that the oldest child has to decide if they are going to school or not by the age of 16 if you want to transfer the funds to another child.
Or else do we change institutions to go with a family plan (because Universitas does not offer a family plan)? Is there still an age restriction that the first child needs to decide by the age of 16 if they are going to school or not, or does it matter?
We are trying to decide if the family plan offers more flexibility (because you seem to say that they are pretty much the same), and if so, is it worthwhile switching institutions and have to pay a penalty?
Thank you!
Nicole

31 Peter

Hi Mike – I have family RESP with 2 kids, 1 – 18 going to University in the fall and 1 that is 15. Do I need to set up a individual plan for the 15 year old if I start to withdraw from the family RESP? (i.e. not sure you can withdraw from a family plan for the older child while still making contributions and getting 20% grant for the other at the same time in the same account).

32 Mike Holman

Hi Peter – just keep your family plan. You are allowed to contribute to the younger child while withdrawing for the older one.

33 Mike Holman

Hi Nicole.

Most of my posts are for self-directed RESP plans. I believe Universitas is a group/scholarship plan which has less flexibility and more restrictions.

Here is an article on the differences:

http://www.moneysmartsblog.com/group-pooled-scholarship-resp-plans-differences/

The companies that offer group RESPs all have their own rules so you should contact them for details. There are normally very large penalties if you try to break the contract.

34 Cha

Hi Mike,

What will happen if the child pursues a short-term course and s/he does not use up all the money in his/her RESP? Will the remaining money be given back to the subscriber?

Thanks.

35 Mike Holman
36 Mike O

Just reading through the page…your wording for lifetime contributions is incorrect. It says $7200. Actually, this is the maximum amount of CESG that will be paid per beneficiary. The lifetime maximum contribution per beneficiary is $50,000 now. Annual maximum contribution that can receive CESG is now $2,500 per year (paying out $500 in CESG) unless there is carry forward, in which case you could receive grant of up to $1000 (20% of $5000). You can always put more than the max amount that can receive grant in a year, however, are subject to the $50,000 lifetime amount. If you do the math, the maximum amount of lifetime contribution that you can make to receive max CESG is $36,000 (x20% equals the $7200 max CESG) so why do any more (up to $50000)?? Because withdrawals and gains are taxed in the kids’ hands, not yours. Hope this helps

37 Mike Holman

@Mike O – Thanks for catching that. I used the word “contribution” instead of “grant”. It’s now fixed.

38 Rajib

Hi Mike,
Quick question – I have set up an Individual RESP for my soon to be 2 year old son and maximized two years worth of grants into it. My second child is now on the way. Is it beneficial for me to switch my existing RESP Individual plan into a Family Plan to accommodate number two? There might be a third kid down the road if that makes a difference at all.
Thanks.

39 Michael

Hi Mike,

Great blog!

My wife and I are expecting the birth of our first child any day now. I am planning to open an RESP account. With the plan to have a second child in the next 2-3 years, should I open an individual RESP account or a Family RESP account for my first child? What are the pros and cons of both?

Thanks.

40 Sandy

Hello,

We were thinking of doing a market-linked RESP with TD for about 10-12 years and switching it to a GIC for the last 7-9 years. Do you advise staying away from market-linked (which allows monthly contributions) entirely?

41 Mike Holman

@Sandy – the market-linked products are almost always a bad deal.

I would look into a balanced mutual fund – then switch to GIC for the last 7-9 years.

42 Angela

Hi
I have a daughter who is 17 and will go into University in Sept 2012. Her father and I each have individual plans for her as we are divorced. He has since become common law with a woman who has boys 9 and 11. I have heard from my daughter that he has now made the individual plan into a family plan. How does this affect her? Can he pull the money from the individual plan and spread it across the three of them in the family plan? If so, what happens to the grant money that has been saved up for her until this point in time? Also, if he does pull his money, does it take all the grant money from the contributions I have made also. Can he pull any money that i have saved because it is for he?, I am worried that he has actually done this in the
fact that she may have no money to go to school
with. Help!

43 Mike Holman

@Angela

Can he pull the money from the individual plan and spread it across the three of them in the family plan?

Yes.

If so, what happens to the grant money that has been saved up for her until this point in time?

It will likely get spread around too.

Also, if he does pull his money, does it take all the grant money from the contributions I have made also.

Nothing he does in his account will affect your RESP account.

Can he pull any money that i have saved because it is for he?

He can’t touch the RESP that is your name. If you are talking about money that you have put into the RESP that is in his name, then yes – he can do whatever he likes with it.

44 Patrick

Hi Mike,

I have a question on Family plan. I have two kids (5 years of age apart). Older one is attending university today, younger one still in grade 10. As of today, the Family plan shows CESG of 4,100 (older) and 6,100 (younger) granted respectively throughout the past 10 or so years of contribution. So far, I have withdrawn EAP of 15,000 under the name of the older kid, and the bank confirmation letter stated that out of it, CESG withdrawn is 5,331. The rest being earnings. My question is individually the older one only has granted 4,100 of CESG, while YTD CESG withdrawal is 5,331. Is this an overdrawn that need to be returned to the Government? Or in a Family plan, the CESG for the 2 kids are kind of ‘mixed together’, and I only need to watch that the older one’s CESG in the next withdrawal will not exceed the lifetime 7,200 limit (which I believe the bank will prompt me if exceeded)? Thanks.

45 Mike Holman

@Patrick – You can share the CESG between kids in a family plan. For that matter you can also do it between individual plans.

Yes – just watch out for the $7,200 limit.

46 bas

I have been reading your website multiple times lately, and I would like to say thank you and great job. It has so many useful info.

I have one question and you might already answered it: if my children decided to pursue university in a different country (Japan, Germany, etc.) is it still beneficial to set up RESP? Is there any special rule? How does the goverment determine if the university is “qualified”?

Thank you.

47 Cip

Thanks for the article,
What I’m confused about is the max lifetime grant of $7200. Is this per child or per plan? I have a daughter now and I’m contributing $167/month for 18 years to max out on the grant. It is in a family plan. Once we have another child, do they also get $7200 in grants?
Thanks,

48 Mike Holman

@Cip – It is per child.

49 Kiran

1-If elder one has used the grant of younger one in family plan then Can younger one has grant again till 7200 to fulfill the gap of grant that has been used by elder one?
2-once Resp open how much year more we can participate.?
3-If child is 13 year can he get full grant 7200 in indiviual plan?
4-We can use grants of kids in indiviual plans as well between other kids?

50 Bernard

Thanks for providing so much useful information. I learned a lot about RESP just from your site. I have a question here:
I have two children. One is 7, the other is 3. I have RESP account with RBC which I contributed $6,000 already three year’s ago. I did not contribute anymore after that. Now I have a RESP family plan with TD e-series. My question is, if I contribute $5,000 this year, how can TD bank know which child the money is for? Because I can use the whole amount for elder one to catch up one more year’s contribution, or the same for the younger one, or split between the two children.

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