A Registered Education Savings Plan enable parents to save for a child’s future college expenses. Anyone can open this type of plan, which is also called an RESP. An RESP can also be opened by a child-care agency. If you do choose to open a plan for a child or grandchild, you can name another adult or yourself as a beneficiary. The following information goes over the types of Heritage Education Funds RESPs that are available.
1. A Family Plan
This type of plan is good to open if you have more than one child in your household. You can name more than one child on the plan for when you need to receive the money and it is time to pay for college. The children for the plan must be related by either adoption or be your own. Children may be stepchildren, children, grandchildren (by adoption or by blood), or sisters or brothers.
The determination of the child or blood relationship is found in the Income Tax Act. According to the legislation, nieces, nephews, uncles, cousins, and aunts are not considered to be related by “blood” or do not constitute “blood” relationships.
The main benefit of a family plan is that the earnings can be shared among the named children. Also, the Canada Education Savings Grant can be used by a beneficiary named in a family Registered Education Savings Plan. The grant can be obtain for up to $7,200. The additional grant can only be remitted if the beneficiaries in the RESP are siblings.
2. Non-family or Individual Plan
This type of Heritage RESP is a good one to choose if you are not related to the child for whom you are saving. This type of plan allows the naming of only a single beneficiary. The beneficiary does not have to be related. This type of RESP can be opened for yourself or another adults.
3. A Group Plan
This type of plan is designed for one child, and the child does not have to be related to the enrolee. A group plan is a good one to choose if you can make recurring payments throughout the RESP’s term. When you select this plan, your savings are combined with other individuals.
How much a child will receive depends on how much money is saved in the group account. You also have to factor the number of students of the same age that are attending school that year. This type of plan is provided by group plan sellers who normally invest the money in investments of a low risk.
Each group plan is different and has its own set of rules. Therefore, if you choose a group account, you need to review the terms carefully before you sign up for the RESP. Fees may be applied if you stop making regular payment to the group plan account. This type of plan is a good idea if you feel more confident having someone else decide on the investments. If you are pretty certain that the child will be attending college, you will find that this plan will be to your liking.
4. Child Plan (™) Whole Life Insurance Plan
Besides the aforementioned RESPs, a whole life insurance plan can be purchased that will cover a child’s education at a university. While RESPs offer money for designated universities, this alternative plan can be used for any educational program.