Enhanced Savings Plan For Children's Education

Registered Educational SavingsPlans (RESP'S) are a vehicle to provide tax assisted savings to fund post-secondary education for both children and grandchildren. The last two Federal budgets have significantly increased the benefits of using an RESP for parents and grandparents who want to provide for a child's university or other post-secondary education.

An RESP is essentially a plan that provides for non-tax deductible contributions and tax-sheltered savings while the funds remain in the plan

Ultimately, funds are to be paid out to the beneficiary while attending post- secondary school. The beneficiary is then taxable on income. Under the rules that existed for many years, the income earned by the plan was lost to the contributor and the beneficiary if the child did not attend a post-secondary institution.

Last year's Federal budget adjusted the rules where the beneficiary did not carry on with a post-secondary education. The new rules allow the contributor to transfer funds to his RRSP without penalty provided that the contributor had RRSP room. Alternatively, the contributor could cash in the plan and pay a 20% penalty tax on accumulated income.

The 1997 Federal budget also increased the annual contribution per beneficiary from $1,500 per year to $2,500 per year.

The most recent Federal budget increased the maximum RESP contribution per beneficiary to $4,000 per year, with a life-time total limit of $42,000. In addition, the Federal Government is proposing to provide an education savings grant of 20% on the first $2,000 of annual contributions to an RESP for beneficiaries up to $400 per year will start in 1998. If contributions of less than $2,000 are made, the unused grant can be carried forward to be credited in a future year.

The net effect of these changes is to significantly enhance the benefits of using RESP's as a savings vehicle for education.

Zlotnik, Lamb & Company has full range of top performing and flexible RESP's to suit your needs.

For more information call Eleanor Wong on our RESP Hotline 688-7208 and in Victoria call 727-3445