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RESP Account Types

Now that you have decided to open a Registered Education Savings Plan (RESP), one of the first questions your financial institution is going to ask you is what type of RESP would you like to open, where you must choose one of the following:

  • a Family RESP
  • an Individual (non-family) RESP, or
  • a Group RESP

The different types of RESP accounts offer slightly different characteristics and you should try to understand each type to ensure that you open the best RESP account for your personal circumstances. The following sections outline the differences between each RESP account type to assist you in your selection.

A Family RESP

The Family RESP account type is ideal if you have one or more family members that you would like to name as beneficiaries of the RESP. The rules that govern this type of account include the following: 

  • The beneficiaries must be related to you, as the subscriber, and can include your own children, adopted children, grandchildren, brothers, and sisters.
  • A Family RESP offers a fair amount of flexibility around amounts contributed each year, the types of investments available, how the funds are paid to the beneficiaries and maturity options.
  • Just as with RRSP and RRIF accounts, investments that are eligible for an RESP account will depend upon whether you decide to open a Regular or Self-Directed RESP account.
  • If one beneficiary does not pursue higher education, or if education costs vary between beneficiaries, you can allocate RESP funds to other qualified beneficiaries.
  • Only a single set of forms are needed to establish an RESP for one or more beneficiaries.
  • Contributions, grants, and earned income are combined and managed as one making investment direction and decisions simpler.
  • You can add or replace a beneficiary at anytime.
  • A beneficiary must be under the age of 21 at the time of being added as a beneficiary to the RESP.
  • The Family RESP plan expiry or maturity date must be no later than the last day of the 35th year after the initial year of the Family RESP.

An Individual (non-family) RESP

An Individual (non-family) RESP account type is ideally suited for those wishing to establish an RESP account where there is only going to be a single beneficiary and that beneficiary is not related to you the subscriber. The rules that govern this type of account include the following:

  • An Individual RESP account can be opened for yourself or another adult as the beneficiary.
  • An Individual RESP offers a fair amount of flexibility around amounts contributed each year, the types of investments available, how the funds are paid to the beneficiaries and maturity options.
  • Just as with RRSP and RRIF accounts, investments that are eligible for an RESP account will depend upon whether you decide to open a Regular or Self-Directed RESP account.
  • You can start an Individual RESP for any beneficiary of any age.
  • Anyone can contribute to an Individual RESP, including extended family members and friends.
  • Beneficiaries can be replaced. Any replacement beneficiary should be under the age of 21 and be a sibling of the replaced beneficiary.
  • The Individual RESP plan expiry or maturity date must be no later than the last day of the 35 year after the initial year of the Individual RESP.

Note: If you are opening an RESP account for a beneficiary that is 18 years of age and older, your RESP account cannot qualify for the Canada Education Savings Grant (CESG), as the grants are only available for beneficiaries 17 years of age and younger.

A Group RESP

A Group type of RESP account (sometimes called a scholarship plan), is much more restrictive. The rules that govern this type of account include the following:

  • A Group RESP can be established when there is only one beneficiary and the beneficiary may or may not be related to the subscriber.
  • You must agree to make regular contributions each year for a fixed number of years.
  • Your contributions are a contractual obligation thereby limiting your flexibility to decrease or miss a payment.
  • Your contributions are pooled with the contribution of other subscribers and the pooled amount is invested together as a lump sum.
  • The amount of a Group RESP available for your beneficiary is variable and dependant upon how many of the RESP beneficiaries represented by the Group RESP pursue post-secondary education.
  • Each Group plan is different and has its own rules. Be sure to ask your Group plan provider for details, and read the plan rules carefully.
  • One benefit of Group RESP accounts is that the plan provider will make all of the investment decisions.
  • You must be certain that your beneficiary will pursue post-secondary education to benefit fully from the plan. In some Group RESP plans, if the beneficiary does not go on to further their education, the subscriber can only withdraw their original contributions less fees. Any earned and accumulated income remains within the Group RESP for the benefit of the remaining plan beneficiaries.

In general, Group RESP plans are structured and managed on an age basis, where all Group RESP contracts for beneficiaries are administered and managed together as one Group RESP account. The Plan’s actuary calculates the amount of regular subscriber contributions and the contribution amount and frequency remain fixed for the period of time until the beneficiary reaches the age of 18 years.

With a Group RESP plan, the amount of payments out of the plan for the benefit of the beneficiary are not specified in the contract because the payments will depend on the number of beneficiaries who can take advantage of the plan in any given year.

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