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Registered Education Savings Plan
What is an RESP?
An RESP, or Registered Education Savings Plan, functions as an agreement between a contributor and a promoter, such as banks, trust companies, and scholarship funds. It serves as a tax-advantaged method for setting aside funds intended for a beneficiary's higher education.
While the contributions made by the contributor are not eligible for tax deductions, any gains generated from these contributions are safeguarded within a tax-free trust. Additionally, these contributions may qualify for the Canada Education Savings Grant (CESG) payments. The investment earnings stemming from both the contributions and CESG payments enjoy tax-free growth until they are eventually withdrawn and added to the recipient's income, at which point they are subject to taxation.
RESP
A registered education savings plan (RESP) is a contract between a subscriber and a promoter (banks, trust companies and scholarship funds) and is a tax-deferred way to save for a beneficiary's post-secondary education. Contributions made by the subscriber are not tax deductible but earnings on such contributions are held in a tax-exempt trust. Contributions may also be eligible for Canada Education Savings Grant (CESG) payments. Investment earnings on contributions and CESG payments grow tax-free until they are distributed and included in the recipient's income and taxed accordingly.