Different Common Questions of RESP
A RESP is known to or is called as a Registered Education Savings Plan. This is a popular tool when it comes to saving for education. The idea behind it is that you will contribute money into an account and the government will contribute to about 20% of what you have placed in, which could reach up to $500 every year. There are also additional grants that are available, but there are some conditions that based on having lower income. The other reason with why RESP is beneficial is because the income generated in the account will grow tax free until this is withdrawn. The money of which the government will give you is called as the Canada Education Savings Grant (CRSG). The subscriber or the contributor is the person that contributes money to the RESP and then the beneficiary will be the person who will receive the benefit or money. The child also needs to have a SIN number in order to have a global resp for them.
If ever you can't or don't contribute each year, you could still catch up your contributions for up to $1000 in grant money every year. You also could contribute any amount in any time as long as the lifetime amount that's contributed is under $50,000.
For the child to withdraw the money, the child needs to have proof of enrollment in a qualifying school, the first time that the money is withdrawn. After that, the money then could be taken out whenever this is needed for school costs. Another thing is that the parent needs to ask for the withdrawal from the institution and needs to direct whether to withdraw from contributions or income for tax purposes.
If ever the child does not go to school, there are several options that are available. The first thing is to keep the RESP in case your child will change its mind. You also could keep global resp open for 36 years after this has started. The money could be transferred to another child when you have more than one. Any money to which is contributed then could be taken back by the contributor without any penalty. The CESG grant money then goes back to the government. All of the income that's generated then is taxed at your income tax rate during the time of withdrawal and a 20%. You also could transfer this money to RRSP when you have RRSP room.
The money to which is inside the RESP which paid out is divided to 2 parts; the Post-Secondary Education Payments and also the money which was given by the government or the Education Assistance Payment. The rule is that when you contribute the money, there are no taxes on it and there are no limits when it is taken out. For money that comes from other sources, there are limits to it, which is why timing and taxes and crucial. Make sure to visit this website at https://www.britannica.com/science/educational-psychology and know more about education.