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RESP Basics

RESP Contribution Age Limit: Your Full Guide


Registered Education Savings Plans (RESPs), like Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs), are savings vehicles used to invest and grow money over time. Understanding the age and contribution limits associated with RESPs is crucial for maximizing the benefits of education savings. Being aware of these limits and planning your contributions accordingly helps you maximize the benefits of RESPs, including government grants like the CESG and CLB. Regular contributions to an RESP can help build a substantial education fund for the beneficiary, ensuring they have the financial support required to pursue post-secondary education.

Secure your child’s educational future with ease.

Age Limit for RESP Beneficiaries

Here’s a breakdown of the age limits for beneficiaries of individual and family Registered Education Savings Plans:

  • Individual RESP: There is no specific age limit for the beneficiary of an individual RESP. You can name anyone as a beneficiary, regardless of their age. The flexibility allows you to designate individuals of any age, including children, teenagers, or even adults, as beneficiaries of the RESP.
  • Family RESP: Beneficiaries must be under 21 years old when they are added to the family RESP. Unlike an individual RESP, where the beneficiary can be of any age, a family RESP has a specific age limit for beneficiaries. Children under the age of 21 can be added as beneficiaries to the RESP. Once a child reaches 21 years old, they cannot be added as a new beneficiary to the family RESP.

Understanding these age limits is essential when setting up an RESP and naming beneficiaries. It ensures the beneficiaries are eligible for government grants and that the RESP aligns with your education savings goals and time horizon.

Contribution Limits of RESPs

The lifetime contribution limit for an RESP is $50,000 per beneficiary. It means the total contributions made to an RESP for a specific beneficiary cannot exceed $50,000 over the lifetime of the plan.

There is no set annual contribution limit for RESPs. The CESG provides a 20% matching grant on the first $2,500 of annual RESP contributions per beneficiary. To receive the maximum CESG grant of $500 per beneficiary per year, you would need to contribute $2,5000 annually to the RESP.

To maximize the CESG grant, you must contribute $2,500 per beneficiary per year. This results in the maximum CESG grant of $500 per beneficiary per year, as the CESG provides a 20% matching grant on the first $2,500 of annual RESP contributions

Understanding these contribution limits is crucial for effectively managing your RESP and maximizing government grants like the CESG. By contributing strategically within these limits, you can ensure that you’re making the most of the education savings opportunities to save for your child’s post-secondary education.

RESP Timeframes

The timeframes associated with a Registered Education Savings Plan are essential for effective RESP planning and management. They help contributors make informed decisions about contributions, withdrawals, and educational goals, ensuring the RESP meets the needs of the beneficiary.


Age Considerations for Withdrawals

If CESG funds are withdrawn from the RESP before being used for educational purposes, a penalty tax and recapture of CESG may apply. The penalty tax is 20% of the CESG portion of the withdrawal. Additionally, the government may reclaim any CESG funds that were previously contributed to the RESP. CESG entitlement stops accruing once the beneficiary reaches 18 years old. After this age, new CESG grants won’t be provided for contributions made to the RESP.

If investment growth earnings are withdrawn from the RESP before the plan has been open for at least ten years and the beneficiary is under 21, a 20% penalty tax applies. However, you can avoid the penalty tax if the earnings are transferred to the beneficiary’s RRSP, provided they have an available RRSP contribution room.

Keep these age considerations in mind when you withdraw from the RESP. It’s essential to use RESP funds for eligible educational expenses to avoid penalty taxes and get the most out of your education savings.

Secure your child’s educational future with ease.

Frequently Asked Questions

What happens if a beneficiary turns 21 while still in high school?

If a beneficiary turns 21 while still in high school, they can continue to receive RESP contributions and CESG grants until the end of the calendar year. This provision allows beneficiaries who are still completing their secondary education to benefit from RESP contributions and government grants.

However, once the beneficiary turns 21, the RESP account enters a transition period known as the “specified period.” You can still make RESP contributions during this period but CESG grants are no longer available. The specified period lasts for 36 years from the date the RESP was opened, providing flexibility for using the RESP funds.

While RESP contributions can continue during the specified period, any withdrawals made during this time must be used for educational purposes to avoid penalties and taxes. The CESG portion of RESP withdrawals made after the beneficiary turns 21 and is no longer for CESG grants may be subject to penalty taxes and recapture by the government if not used for educational purposes.

Can I withdraw funds from the RESP before it’s been open for 10 years?

Yes, you can withdraw funds from an RESP before it’s been open for 10 years. However, there are certain considerations and potential tax implications. Withdrawals of earnings from the RESP may be subject to a penalty tax of 20% unless the beneficiary is at least 21 years old at the time of withdrawal. This penalty tax is the Accumulated Income Payment (AIP) tax.

There are exceptions to the AIP tax penalty for RESP withdrawals, such as if the beneficiary is eligible for the Disability Tax Credit (DTC) or if the funds are rolled over to the beneficiary’s Registered Disability Savings Plan (RDSP). Withdrawals of contributions are not subject to AIP tax and can be withdrawn tax-free at any time. Withdrawals of CESG and CLB grants are subject to specific rules and may be subject to repayment if used for non-educational purposes.

Written by Embark

Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.