1. Consult the parent(s) or primary caregiver.
You may not be the only one who wants to set up an RESP for the child. One or more plans may have already been started by the child’s parent(s), grandparents, aunts, or uncles. Asking for permission not only helps you better understand the situation but also helps the parent(s) coordinate with everyone who has opened an RESP for the child.
2. Confirm whether or not you are a blood relative to the child.
According to the Income Tax Act (ITA), only siblings, parents, or grandparents are classified as blood relatives. If you are an aunt, uncle, cousin, or other family member of the child, you are not considered related by blood.
3. Open a family or individual plan.
If you are not a blood relative, open an RESP Individual Plan. In this case, you can only support one child per plan. If you are a blood relative, open an RESP Family Plan. If there is more than one child you want to help and they are all siblings under the age of 21, enrolling them all in one RESP Family Plan can save on plan fees.
4. Name a replacement subscriber for your RESP.
An RESP belongs to the subscriber (that’s you) not the beneficiary (the child you opened it for). To ensure the continuation of the RESP in the event of your death, a joint subscriber would be recommended. However, only a spouse can be named as a joint subscriber. If you don’t have a spouse, it’s important to name a replacement subscriber in your will. If you don’t identify a replacement subscriber, the RESP will become part of your estate and it will be much harder for your executor to arrange for those savings to be directed to the child. On top of that, your estate will also have to return the money the government contributed to the RESP (like grants).
5. Explore your grant options.
Every child with an RESP is eligible for government grants. Under the Canada Education Savings Grant (CESG) program, there is the Basic CESG and the Additional CESG. As a non-primary caregiver, you can apply only for the basic Canada Education Savings Grant (CESG). In this case, you’ll have to provide both your and the child’s Social Insurance Numbers. The child does have access to other grants such as the Additional CESG, and the Canada Learning Bond (CLB) as well, but to apply for these you must obtain the consent of the parent(s) or primary caregiver by providing their signatures and SINs on the grant application forms, because the eligibility of receiving the Additional CESG and CLB, in particular, is determined by the primary caregiver’s family net income.
6. Start contributing savings, but pay attention to the contribution rule.
The maximum lifetime RESP contribution limit per child is $50,000. If there is more than one RESP plan for a child, different plan subscribers should make sure they communicate clearly on the amount they are contributing so that they don’t over-contribute (which you’ll be penalized for).
The RESP contribution process can be confusing—especially if a child has multiple RESP subscribers. If you’d like to chat with someone on the phone or sit down with a financial advisor, give us a call.