RESP contributions

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StuBee
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RESP contributions

Post by StuBee »

Another question...

I am currently the subscriber to a family RESP. Are there any consequences (tax or otherwise) if my spouse makes the contribution (instead of me)?
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twa2w
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Re: RESP contributions

Post by twa2w »

No tax consequences - It is after tax money that goes in and when your contributions come out they are tax free.
If you are sole subscriber, then if she makes a contribution, my understanding is it is as if you made it.

If you are joint subscibers that is a different story.

Where this may affect you is if your child does not go to school and you decide to roll the earnings to an RSP. If not a joint subscriber, it would have to be your RSP. If you are joint subscribers, you should have more options for the rollover - I am not in my offcie so don't have the details at hand so the above is from memory.

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marty123
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Re: RESP contributions

Post by marty123 »

If your spouse is joint subscriber:

- There's the issue of creditor protection (the principal is not your child, it belongs to the subscribers: 2 subscribers = double the creditors). For some people, it may matter.
- If your child doesn't attend, you can roll the accumulated income payment in the subscriber's RRSP (if it's joint, you have double the options, as explained by twa2w)
- If your child doesn't attend, you can also pay the accumulated income payment out to the subscriber (if it's joint, double the options as well). It's taxable, so it is best paid to the lower income subscriber. An additional 20% tax also applies.
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StuBee
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Re: RESP contributions

Post by StuBee »

Thanks for the information.

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cashinstinct
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Re: RESP contributions

Post by cashinstinct »

I tried to google but could not specific info about joint subscriber.

My question: Till when can you add a joint subscriber? Age maximum of the plan / child ?

Context: I will open a RESP for my child and I will make the contributions only (common law, since I have higher income, I use my assets to make contributions myself).

Therefore, I will be the only subscriber, since it's my capital.

However, in the future, if child does not go to university, I could be interested in moving the capital to her mother's RRSP since I might not have enough space in mine.
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Re: RESP contributions

Post by Webby »

twa2w wrote:No tax consequences - It is after tax money that goes in and when your contributions come out they are tax free.
If you are sole subscriber, then if she makes a contribution, my understanding is it is as if you made it.

If you are joint subscibers that is a different story.

Where this may affect you is if your child does not go to school and you decide to roll the earnings to an RSP. If not a joint subscriber, it would have to be your RSP. If you are joint subscribers, you should have more options for the rollover - I am not in my offcie so don't have the details at hand so the above is from memory.

Cheers
J
You need serious clarification here. The growth in the RESP is taxed upon withdrawal, but is taxed in the hands of the student. If the student does not pursue post-secondary education then you need to have contribution room in you RRSP to absorb the growth. If not you will have to pay tax (as well as a 20% fee) on this growth which could be substantial. ALSO you will have to repay the CESG grants that are applied to contributions in the RESP which could be as much as $7,200.
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kcowan
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Re: RESP contributions

Post by kcowan »

Webby wrote:The growth in the RESP is taxed upon withdrawal, but is taxed in the hands of the student. ..
Yes but just the EAP portion, which is the CESG grants along with the overall growth in the RESP as a %. The PSE portion is tax-free in the hands of the student.

The tricky part is is deciding how much the EAP should be each year. If the overall growth was 100%, then the EAP would be 14400 to meet the 7200 limit per student. I have resorted to a spreadsheet to handle my five GCs since the overall growth number will change each year. First payment this year, final payment in 2032.
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big easy
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Re: RESP contributions

Post by big easy »

kcowan wrote:
Webby wrote:The growth in the RESP is taxed upon withdrawal, but is taxed in the hands of the student. ..
Yes but just the EAP portion, which is the CESG grants along with the overall growth in the RESP as a %. The PSE portion is tax-free in the hands of the student.

The tricky part is is deciding how much the EAP should be each year. If the overall growth was 100%, then the EAP would be 14400 to meet the 7200 limit per student. I have resorted to a spreadsheet to handle my five GCs since the overall growth number will change each year. First payment this year, final payment in 2032.
So when it comes time to withdraw, do you get a statement from the promoter stating the amount of CESG grants, contributions and the rest being growth? Then the tax free growth = CESG grants/(CESG grants + contributions) x growth amount?

I'm a little concerned if TD Waterhouse is tracking this, especially since the RESP was transferred in some time ago from TD Mutual Funds.
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