These plans are an incentive program to encourage people to accumulate savings to provide for the post-secondary education of children or grand-children. The main features are as follows:

• Although usually arranged by a parent for a child, the plan can actually be set up for any individual.
  
  
• Contributions to the plan are not tax-deductible
  
  
• Income earned on the contributions is not taxable within the plan
  
  
• Income splitting is achieved because withdrawals from the plan to pay for education are taxed at the beneficiary's tax rate, which is normally lower than the tax rate of the contributor
  
  
• Incentive grants are also provided by the government, who provides 20% grants into the plan on contributions of up to $2,000 per year
  
  
• Although there used to be a limit on the amount of the annual contribution into the plan, there is no longer any limit on contributions made after 2006
  
  
• Contributions can be made until the plan beneficiary is 31 years old
  
  
• RESP's are of two types: group plans and individual plans
  
  
• Withdrawals from the plan can only be for payments to specified educational institutions
  
  
• If the beneficiary does not ultimately attend one of the designated schools, the contributor can remove his original contributions tax-free from the plan, but income earned in the plan is taxable to the contributor and is subject to an additional 20% surtax.
  
  

In summary, RESP plans need to be carefully evaluated before they are set up. The above outline is general in nature, and specific plans may differ in some respects from each other, especially in the area of how the funds are invested within the plan. Please contact Simkover and Associates at 905-943-4046 if you need further accounting services or advice in relation to this topic. Click here for additional contact information