The name Registered Education Savings Plan (RESP) suggests that it is a type of account which is offered by the government to embolden members of a family to save long-term for a child’s education. It is usually the parents who open the account for their children. In such a case, the parent is called the subscriber and the child as the beneficiary. Moreover, aunts, uncles and other relatives are also eligible for setting up RESP’s for a child.
A family RESP consents multiple beneficiaries to be titled on the account, however, they must have some blood relation or adopted child of a family. A common case is that; multiple siblings are named below one plan. In case of an individual plan, contributions are named in the name of a particular beneficiary and are usually divided equally among the beneficiaries. But family RESP is more flexible than an individual one.
Let us think of a situation where one child decides not to go to school, so the grants or their part of the contributions and returns can be used for the reimbursement of another child’s education. It is relatively easier to manage one account instead of multiple accounts if the balance is small. Nevertheless, it is very vital to calculate the withdrawals correctly to ensure that the withdrawal by each beneficiary doesn’t exceed $7,200 from the grant part of the government. In case of individual RESP, you have the flexibility to endow how you want.
It is to be noted that, neither stepchildren or step-grandchildren nor nieces or nephew are applicable to be beneficiaries of a family RESP. An aunt, uncle, parent or grandparent whoever are willing to open an account for one of the mentioned classes of beneficiaries must apply to an individual plan for that child. The minimum age for a beneficiary to be added to an existing, qualifying family plan is under 21.
Benefits of Family RESP Plans:
Less paperwork required: It is much easier and requires less paperwork while adding a beneficiary when a child is born than opening a new individual plan.
Probable fee saving: You can make considerate savings on the fees if you possess a family RESP. Such a benefit cannot be availed by the individual RESP beneficiaries.
Smooth Withdrawals: A child can have varying education requirements or desires. So in family RESP, a child can use more of the money in a quite flexible way than with individual plans, excepting CESG money which is limited to withdrawal of $7,200 per child.
So to conclude, there is not much difference in family and individual plans and it is not likely to go wrong with either one. But it is true that it is a bit easier to manage a family RESP due to the above-mentioned benefits. Only after knowing about the different benefits and limitations, choose the type of RESP account you wish to form and follow the necessary steps to create one.