A Registered Education Savings Plan (RESP) is an education savings plan that is registered with the Canada Revenue Agency. It is a tax-sheltered investment vehicle that is eligible for government grant money and can be set up for any “beneficiary”, including your child, grandchild, nephews, nieces or family friends. The “subscriber” is the person who opens the plan and makes contributions. The beneficiary is the person who uses the funds, called Education Assistance Payments (EAPs) for their post-secondary studies. Beneficiaries must be a resident of Canada and have a social insurance number (SIN).
You can contribute any amount to an RESP for up to 31 years, to a lifetime contribution maximum of $50,000 per beneficiary. While you, as the subscriber can’t deduct the contributions you make to an RESP from your taxable income, the investment income earned on your RESP contributions is tax-deferred. When the income is withdrawn for qualifying post-secondary education expenses, it is taxable to the beneficiary. An RESP plan can remain open for as long as 35 years.