{"id":1255,"date":"2023-10-25T11:01:57","date_gmt":"2023-10-25T11:01:57","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/?p=1255"},"modified":"2025-02-17T22:26:27","modified_gmt":"2025-02-17T22:26:27","slug":"you-asked-should-i-open-the-resp-for-a-grandchild","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/2023\/10\/25\/you-asked-should-i-open-the-resp-for-a-grandchild\/","title":{"rendered":"YOU ASKED: Should I Open the RESP for a Grandchild?"},"content":{"rendered":"\t\t
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\n\t\t\t\t\t\t\t\t\tHow has the cost of an education grown over time? A look back at the historical cost of undergraduate tuition provides some insight. For those who went to university in the 70s and 80s, tuition was largely in the hundreds of dollars. Today, average undergraduate tuition has exceeded $7,000, and once room and board, as well as other supplies, are factored in, the cost can be upwards of $30,000 per year.\n\nIt is, therefore, not surprising that many grandparents are now considering supporting the cost of a grandchild\u2019s education through the use of the Registered Education Savings Plan (RESP). The RESP offers many benefits: tax-deferred growth within the plan, earnings taxed at the child\u2019s tax rate when eventually withdrawn and, of course, the Canada Education Savings Grant (CESG) \u2014 funds paid into the plan by the federal government, potentially adding an additional $7,200 per qualified beneficiary.\n\n\"\"\n\nWhile grandparents can open the RESP as the \u201csubscriber\u201d for the benefit of a grandchild, there may be unintended consequences in certain situations. Here are three, along with some potential mitigating alternatives:\n\nWhat if the child opts not to pursue higher education?<\/strong>\n\nIf the RESP will not be used for qualifying educational purposes, it may be possible to transfer up to $50,000 of the RESP\u2019s accumulated income to the subscriber\u2019s RRSP, if contribution room is available. However, grandparents over 71 years old will not hold the RRSP and there are likely to be tax implications.\u00a0Alternative:<\/em><\/strong>\u00a0One approach might involve grandparents setting up a family plan with multiple beneficiaries (such as the grandchild\u2019s siblings or cousins). If one beneficiary chooses not to pursue a qualifying education, the plan\u2019s funds can benefit other beneficiaries. Another alternative would be for the parents to set up the RESP and have grandparents gift funds as contributions.\n\n\"\"\n\nWhat if you relocate from Canada?<\/strong>\n\nIf the RESP subscriber decides to retire outside of Canada, there may be tax repercussions. For instance, in the U.S., the IRS doesn\u2019t recognize the RESP\u2019s tax-deferred status and views it as a foreign trust. Consequently, the annual income and grants earned within the RESP would be subject to U.S. taxation for the subscriber.\u00a0Alternative:<\/em><\/strong>\u00a0Before leaving Canada, transferring the RESP to a new one with a Canadian-resident subscriber but the same beneficiary may be a prudent move.\n\nWhat occurs in the event of death?<\/strong>\n\nMany incorrectly assume that, upon death, RESPs are treated in the same manner as RRSPs and bypass the subscriber\u2019s estate. However, generally, if there\u2019s no surviving joint subscriber or alternate arrangement, the RESP assets become part of the deceased subscriber\u2019s estate. This means that the plan will be collapsed, triggering tax implications for received income and grants, and the value will become part of the estate property, to be distributed to the estate\u2019s beneficiaries. These beneficiaries may not be the same as the RESP beneficiary. Alternative: To ensure the RESP\u2019s original intent, instructions for the RESP can be directed within the last will, such as naming a replacement subscriber.\n\n

The information contained herein has been provided for information purposes only. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information has been provided by J. Hirasawa & Associates and is drawn from sources believed to be reliable.\nThe information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual\u2019s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) and the authors do not guarantee the accuracy or completeness of the information contained herein, nor does WAPW, nor the authors, assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.\n\u00a9\ufe0f 2023, Wellington-Altus Private Wealth Inc. ALL RIGHTS RESERVED. NO USE OR REPRODUCTION WITHOUT PERMISSION<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

How has the cost of an education grown over time? A look back at the historical cost of undergraduate tuition provides some insight. For those who went to university in the 70s and 80s, tuition was largely in the hundreds of dollars. Today, average undergraduate tuition has exceeded $7,000, and once room and board, as […]<\/p>\n","protected":false},"author":68,"featured_media":3017,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[40],"tags":[81,165,145],"class_list":["post-1255","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","tag-investment-insights","tag-saving-strategy","tag-wealth-planning"],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/1255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/users\/68"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/comments?post=1255"}],"version-history":[{"count":4,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/1255\/revisions"}],"predecessor-version":[{"id":3165,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/posts\/1255\/revisions\/3165"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/media\/3017"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/media?parent=1255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/categories?post=1255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/towerwealthadvisory\/wp-json\/wp\/v2\/tags?post=1255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}