Understanding the Basics: Individual RESP vs. Family RESP

1
Understanding the Basics
vs
Individual RESP
Family RESP
2
What is a Registered Education Savings Plan?

• Establishing a Registered Education Savings Plan
  is a smart way to save and make it financially
  easier for you when sending your child to
  college. When deciding between an individual or a
  family RESP, however, it would be only after
  understanding the differences, benefits, and
  limitations that one would consider placing a
  child in an individual RESP. In this blog, the
  elements of both individual and family RESP are
  discussed to help you make a worthwhile decision.
• An RESP is a tax-advance savings plan that allows
  parents, relatives, or friends to save money
  toward the post-secondary education of a child.
  The Canadian government helps these savings
  efforts through grants and bonds that will let a
  Registered Education Savings Plan grow, therefore
  making this a very good option for funding
  education in the future.

3
Individual RESP

• Definition and Eligibility An individual RESP is
  an account set up for one beneficiary. Anybody
  may open an individual RESP for any child,
  irrespective of the relationship. This makes it
  very popular with those people who would want to
  contribute to a child's education but are not
  related, like godparents or family friends.
• Contributions and Limits As with every other
  RESP, the contributions that are made to an
  individual plan are not tax-deductible, but the
  investment growth is tax-deferred until it is
  withdrawn. The lifetime contribution limit per
  beneficiary is 50,000, and such contribution
  qualifies for the CESG of the government, under
  which it adds 20 to the initial 2,500
  contribution annually.

4
Individual RESP PROs COns

• Advantages
• Flexibility Individual RESPs are incredibly
  flexible when it comes to who can open one and
  for whom.
• Simple Management Managing an individual RESP is
  straightforward since it involves only one
  beneficiary.
• Disadvantages
• Limited to One Beneficiary If the beneficiary
  decides not to pursue higher education,
  reallocating the funds to another child involves
  opening a new RESP or undergoing a transfer
  process, which might complicate the grant
  allocation.

5
Family RESP

• Definition and Eligibility A family RESP allows
  subscribers to save for multiple children within
  one plan. However, all beneficiaries in a family
  RESP must be related to the subscriber by blood
  or adoption, and they must be under 21 years old
  when they are named as beneficiaries.
• Contributions and Limits The contribution limits
  and rules for a family RESP are similar to those
  of an individual RESP, including the 50,000
  lifetime limit per child and eligibility for the
  CESG. However, the total contribution is shared
  among all beneficiaries, which can be an
  efficient way to manage savings if you have more
  than one child.

6
Family RESP PROs COns

• Advantages
• Cost-Effective A family plan is cost-effective
  and easier to manage with one set of fees and one
  account for multiple children.
• Flexibility in Allocation Funds can be allocated
  as needed among the beneficiaries, which is
  particularly beneficial if one child does not use
  the full amount for their education.
• Disadvantages
• Restricted Eligibility Only siblings can share a
  family RESP, limiting its utility for those
  looking to save for children who are not
  siblings.
• Complex Withdrawals Withdrawals must be
  carefully managed to ensure they are distributed
  fairly among the beneficiaries, according to
  their educational needs.

7
Choosing Between Individual and Family RESPs

• When deciding between an individual and a family
  RESP, consider the following factors
• Number of Children If you have more than one
  child and they are siblings, then you can instead
  consider the family RESP to be more advantageous
  otherwise, for non-siblings, separate individual
  RESPs should be made.
• Relationship to the Beneficiaries Family RESPs
  are restricted to siblings related by blood or
  adoption, while individual RESPs have no such
  restriction.
• Future Uncertainties Not every child may go on
  to post-secondary education. The family RESP
  allows the money to be reallocated to siblings
  individual RESPs are not as flexible when one
  beneficiary decides not to pursue an education.

8
Final Thoughts

• Individual and family RESPs are the two most
  valuable instruments for saving for a child's
  education in Canada. Knowing what each type of
  plan is about better orients you toward the ideal
  way to save according to your family situation
  and finances. Whichever path is chosen, opening
  an RESP is the smart move that will help lessen
  those financial burdens brought on by higher
  education.
• You can definitely see a financial advisor who
  can give you specific tips on how to maximize
  your education savings and get specific advice
  and the best possible RESP quotes for your
  situation. Be it a family plan that will cover
  all your children or individual plans catering to
  specific needs, a Registered Education Savings
  Plan in Canada is one of the ways that offers
  peace of mind about your child's academic future.