Rob Carrick discussed the implications of the removal of RESP contribution limits in a recent column in The Globe and Mail. Does it make sense to make a big contribution to the RESP even if you don’t get the 20% matching grant? While this is not an issue that most people will face, it poses an interesting question: Is the RESP an attractive option if all it offers is tax-sheltered growth without the benefit of a grant?
I don’t have the numbers to back it up but I think there might be far better options than contributing a lump sum to the RESP, such as investing in a taxable account in a tax-efficient manner or gifting the money to the child to invest (though income and dividends will be attributed back to you). Personally, we put just enough money into the RESP to get the maximum match and like most people, we also have other priorities that need funding like retirement accounts and a mortgage.
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1 response so far ↓
1 Mike // Mar 22, 2007 at 9:12 am
I’ve heard that the trust option is better for taxes if the kid doesn’t go to school but to me that’s an incentive not to go to school since the kid owns the trust account.
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