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How an RESP Works

Who Can Be a Subscriber?

Date: July 2018

The subscriber or anyone that takes the place of the subscriber makes contributions to the RESP. Please note that once these contributions are made you can no longer withdraw or deduct any amount contributed from your income on your income tax and benefit return.

The promoter is the one who commonly pays the contributions to the beneficiaries along with the income earned. The latter one is paid as EAP (educational assistance payments).

In situations when the promoter is not able to pay to the beneficiaries, he/she makes the payment to the subscriber. Kindly note, that subscribers don't include the contributions in the income when they pay the beneficiaries.

Under normal circumstances, the beneficiaries usually receive the EAPs together with the contributions from the promoter. The EAPS are included in their income on the annual basis. However, as stated earlier, their contributions are not necessarily to be included in their income.

The education savings plan contract is registered by the CRA as an RESP, whereas lifetime limits are established by the Income Tax Act on the amount that can be contributed for each beneficiary.

The RESP must include the clauses saying that no contributions are allowed at any time in the future after the end of the year including the 31st anniversary of the planned opening. The deadline for the plan's completion is the 35th anniversary of the opening of the plan.

The RESP must include the clauses saying that no contributions are allowed at any time in the future after the end of the year including the 31st anniversary of the planned opening. The deadline for the plan's completion is the 35th anniversary of the opening of the plan. There are two exceptions to the rules above. In case the RESP is a specified plan, different conditions will apply. Additional contributions can be accepted.

A Summary of How an RESP Works

  1. A subscriber signs an RESP contract with the promoter and names one or more beneficiaries under the plan.
  2. The Government grant will be paid to the RESP only after the contributions to the RESP are made by the subscriber. Any special provincial education savings program, Canada Learning Bond (CLB) or Canada Education Savings Grant (CESG) can be the grantors.
  3. All amounts paid into the RESP are controlled by the promoter. Note, that your income is not taxable while it stays in the RESP. The promoter will ensure that payments from the RESP are made in full compliance with the terms and conditions of the RESP.
  4. This is the phase when the subscriber's contributions can be returned by the promoter on the tax-free basis.
  5. On this stage, the promoter processes the payment to the beneficiary in other to finance his/her post-secondary education.
  6. Accumulated income payments can be made by the promoter.

Criteria for Becoming a Subscriber

As long as it is not a family plan, there is no restriction/ban on who can be a subscriber under an RESP originally.

You have to meet the following terms and conditions below:

  • You and your spouse or your partner in law can be joint subscribers under an RESP.
  • A public primary caregiver of a particular beneficiary under an RESP is also qualified to be a subscriber.

A public primary caregiver is an individual with a special allowance in accordance with the Children's Special Allowances Act and may be:

  • the department, institution, and agency that takes care for the beneficiary; or
  • the public curator or the public trustee of the province of the beneficiary's official residence.

In case you are not an original subscriber, you still have a chance to become the one if you meet one of the following conditions:

  • you are a spouse or common-in-law partner or a former common-law partner of a subscriber under the RESP;
  • you are a public primary caregiver, who has acquired the public primary caregiver's rights as a subscriber under the RESP;
  • you have been continuously making contributions on behalf of the deceased subscriber under the RESP.

A social insurance number (SIN) must be provided to the promoter by every subscriber under an RESP before CRA can register the RESP.