Many proud grandparents would love to help their grandkids save for their college or university education. In this MoneyTalk Minute, Kim Parlee details some key things to consider when opening an RESP for any child.
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Let's say you've decided to do something amazing for your grandchildren-- help fund their education by opening up a Registered Education Savings Plan. But what happens if they don't pursue a post-secondary education? A few things to keep in mind when it comes to taxes.
If you close the RESP, the government takes back its grant money. Your contributions are returned. And if certain conditions are met, the income generated is given to you. And if that RESP is over 10 years old, you can transfer up to $50,000 of the income into your RRSP, if you have room to reduce your tax exposure.
But the cutoff for being able to contribute to an RRSP is 71. In other words, if you're over 71 when the RESP is closed, you may have to pay taxes on that income. So think carefully about how to support your grandchildren. And, remember, it's often helpful to talk with an advisor.
If you close the RESP, the government takes back its grant money. Your contributions are returned. And if certain conditions are met, the income generated is given to you. And if that RESP is over 10 years old, you can transfer up to $50,000 of the income into your RRSP, if you have room to reduce your tax exposure.
But the cutoff for being able to contribute to an RRSP is 71. In other words, if you're over 71 when the RESP is closed, you may have to pay taxes on that income. So think carefully about how to support your grandchildren. And, remember, it's often helpful to talk with an advisor.