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Family resp 2 kids

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  • Apr 23rd, 2019 11:23 am
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[OP]
Member
Oct 27, 2009
270 posts
108 upvotes
Hamilton

Family resp 2 kids

I'm doing some research to open an RESP account for my kids. I'm a bit behind as they are 6 and 9 year old.

My plan is to open a family plan and make up ground by investing $5,000 for each kid this year. Hopefully I can do this and subsequent years as well.

My question is, if one of the kids does not go to school, do I lose out on a CESG portion granted for that child?

Also, in a second scenario, even if they both go to school, does the CESG portion have to be withdrawn an equal amount per child? Or can I for example designate all of it to the older child?
11 replies
Sr. Member
Jan 14, 2010
638 posts
178 upvotes
Central Ontario
Q1: Yes
Q2: Yes. In fact, you have to keep tabs that you don't accidentally withdraw kid#2 CESG on behalf of kid#1; otherwise you forfeit that grant for kid#2 and have to pay it back for kid#1

Good to get started, even a bit late. Here's a quick resource for withdrawal info: MoneySense RESP
Here's an even better one to explain family plan grants
[OP]
Member
Oct 27, 2009
270 posts
108 upvotes
Hamilton
Cocodc, thanks for the info. I will check it out. So other than possibly fees, there isn't really any benefit to a family plan?
Deal Expert
Aug 2, 2001
15769 posts
5950 upvotes
stimy wrote:
Apr 16th, 2019 9:28 pm
Cocodc, thanks for the info. I will check it out. So other than possibly fees, there isn't really any benefit to a family plan?
One family plan versus two individual plans would incur lower fees if you do not have enough to waive them. I think this is the biggest benefit to a family plan - easier / simpler / cheaper to manage. I'm not sure this is a big deal for you or not - for me it's not. We're behind too but we are going to open up individual accounts for our children because we have no fees at our brokerage. We are the type to just contribute once a year so management isn't a big deal (especially with funds like XGRO/VGRO/XBAL/VBAL).
Sr. Member
Jan 14, 2010
638 posts
178 upvotes
Central Ontario
stimy wrote:
Apr 16th, 2019 9:28 pm
Cocodc, thanks for the info. I will check it out. So other than possibly fees, there isn't really any benefit to a family plan?
I believe a family plan will let you share contributions and gains (just not CESG). So if one child doesn't go to post-secondary (or gets a blessed full ride somewhere south), you could use all the funds in a family plan on the other child.
Plus I just find it's easier. It's never going to be enough money, so as long as there's some equity between what's given to both children (notice equity, not equality… living at home going to community college takes much less resources than funding an engineering or business degree in another time zone), that seems fair to me.
Newbie
Feb 9, 2016
20 posts
15 upvotes
I asked a similar question when I had my second child last year. The RBC rep I dealt with kept telling me that it was "better" to have a family plan without knowing why. Upon doing some research I learned that the CESG is granted on a per child basis so if you have more than one beneficiary listed on a family RESP you have to track each kid's CESG and as pointed out you cannot transfer CESG between kids. The main benefits to a family plan are potentially lower costs and potentially simpler to manage (also, potentially more complex as discussed below).

Ultimately, my spouse and I decided that with 2 kids it was actually easier to set up 2 separate RESP's for the following reasons:
1. We have enough invested with RBC DI that we do not pay any account fees on RESPs
2. Easier to track CESG when each kid has their own account.
3. Easier to manage 2 separate accounts as the kids near post-secondary age. Earlier on its easy to manage an all-equity or heavy equity fund (and you save a few dollars on trades). But as child-1 nears post-secondary age she will need a different asset allocation then child-2 (heavier bonds/GICs) this creates a situation where I would be notionally managing 2 portfolios inside 1 RESP account and tracking each child's percentage of each holding.
4. Equity - I find it easier to deposit the same amount of dollars into the 2 separate accounts and have the same allocation strategy and be able to say to each kid "you have this amount to pay for school".

Final note, if one child does not attend post-secondary you can roll the non-CESG amounts over to a sibling tax-free in most cases.

In conclusion, the only downside to us was approximately $30 in trade fees per year (we re-balance RESPs once per year and they hold a maximum of 3 ETFs at a time)
[OP]
Member
Oct 27, 2009
270 posts
108 upvotes
Hamilton
So what you guys are saying makes total sense. Im thinking either questrade or TD. Either way I'll be bringing a cibc investors edge account with me . It's not much but enough so that fees will be waived at eirher, I think.

The only thing I'm not quite clear on, if the CESG is not maxed out, it seems like you can transfer CESG from one kid to the other up to the $7200 max. I'm still trying to research this. If that's the case, would it matter if it was family or individual plan?
Deal Addict
User avatar
Oct 14, 2001
1600 posts
399 upvotes
GMA
For the reasons highlighted by YegGuy, we have a Family RESP per kid since it makes it easier to track. Since they're with Questrade, there are no admin fees, no transaction costs to buy and since the All-In-One ETF were introduced, it is easier to manager than ever before since it's 100% XGRO.
Banned
Apr 17, 2019
3 posts
cocodc wrote:
Apr 16th, 2019 7:52 pm
Q1: Yes
Q2: Yes. In fact, you have to keep tabs that you don't accidentally withdraw kid#2 CESG on behalf of kid#1; otherwise you forfeit that grant for kid#2 and have to pay it back for kid#1

Good to get started, even a bit late. Here's a quick resource for withdrawal info: MoneySense RESP
Here's an even better one to explain family plan grants
OP, you don't have to keep track of CESG withdrawals. All the major banks will do that for you.

As for how CESG grant works, cocodc is partially correct.

If 1 child does not go to school, the other child can use the grant money UP To the maximum per child of $7,200. Why this is important is because if you can't maintain your $5,000 contribution per child to MAX out the grant, and don't make it all the way to $7,200, and one kid doesn't go to school, the other kid can use that grant amount... (no more than $7,200).. This is why a 'family plan' is what you want to open...

That being said, if you open an individual plan, you can transfer it over into a family plan later on (for those that are unsure about which to open).

As for grant being returned... If kid does not go to school and there is left over grant money:
-grant money is repaid to the governemnt.
- principal is returned to you.
-growth is taxed at 20% when redeemed from RESP... and then the rest is added to your income (taxed at marginal tax

this is unlikely if you have 2 children. ideally if 1 kid does not go to school, you want to use up ALL the money for the other kid. and of course any excess grant money over $7200 goes back to governemnt.
Banned
Apr 17, 2019
3 posts
YegGuy wrote:
Apr 18th, 2019 11:55 am
I asked a similar question when I had my second child last year. The RBC rep I dealt with kept telling me that it was "better" to have a family plan without knowing why. Upon doing some research I learned that the CESG is granted on a per child basis so if you have more than one beneficiary listed on a family RESP you have to track each kid's CESG and as pointed out you cannot transfer CESG between kids. The main benefits to a family plan are potentially lower costs and potentially simpler to manage (also, potentially more complex as discussed below).

Ultimately, my spouse and I decided that with 2 kids it was actually easier to set up 2 separate RESP's for the following reasons:
1. We have enough invested with RBC DI that we do not pay any account fees on RESPs
2. Easier to track CESG when each kid has their own account.
3. Easier to manage 2 separate accounts as the kids near post-secondary age. Earlier on its easy to manage an all-equity or heavy equity fund (and you save a few dollars on trades). But as child-1 nears post-secondary age she will need a different asset allocation then child-2 (heavier bonds/GICs) this creates a situation where I would be notionally managing 2 portfolios inside 1 RESP account and tracking each child's percentage of each holding.
4. Equity - I find it easier to deposit the same amount of dollars into the 2 separate accounts and have the same allocation strategy and be able to say to each kid "you have this amount to pay for school".

Final note, if one child does not attend post-secondary you can roll the non-CESG amounts over to a sibling tax-free in most cases.

In conclusion, the only downside to us was approximately $30 in trade fees per year (we re-balance RESPs once per year and they hold a maximum of 3 ETFs at a time)
yea, unfortunately I think you were miss-informed and I think you have made a poor decision unfortunately. read my previous post to this one, as it explains how grant money can be 'shared'. RESPs are pretty complex to most financial reps and to be frank, most bank branches do not want to deal with them because the 'sale' is not big enough for the advisor.. so most advisors in branch banks are not up to date cause they barely touch RESPs.

that being said, I do not know how the discount brokerages track CESG pay outs. HOWEVER, it's not that complicated and you can call revenue Canada to find out what has been paid out if you are running your own.

most people will go to a branch however, and in that case the banks do keep track of CESG payouts as they are the ones that are issuing the T4a
Newbie
Sep 18, 2017
76 posts
67 upvotes
I went family plan and takes ma about 1 minute a year to update my spreadsheet of contributions and grants. $5,000 deposits every January 1st followed by 2 x $500 grants on February 28 or March 1 every year.

Kids are 11 and 9 and now have $108,000 combined. 100% XIC for several years but switched to VGRO earlier this year. Will move to VBAL in 2-3 years and eventually start putting $20k a year into GICs and/or short term bonds.

$60,000 total contributions and $12,000 total grants to date.
Newbie
Feb 9, 2016
20 posts
15 upvotes
starb99 wrote:
Apr 18th, 2019 10:57 pm
yea, unfortunately I think you were miss-informed and I think you have made a poor decision unfortunately. read my previous post to this one, as it explains how grant money can be 'shared'. RESPs are pretty complex to most financial reps and to be frank, most bank branches do not want to deal with them because the 'sale' is not big enough for the advisor.. so most advisors in branch banks are not up to date cause they barely touch RESPs.

that being said, I do not know how the discount brokerages track CESG pay outs. HOWEVER, it's not that complicated and you can call revenue Canada to find out what has been paid out if you are running your own.

most people will go to a branch however, and in that case the banks do keep track of CESG payouts as they are the ones that are issuing the T4a
Thanks for pointing out my error. I went back and re-read the rules on CESG. What I learned is that CESG funds can be shared but no one child can receive more than $7,200 in CESG grant money.
So, I have 2 RESP’s. If I contribute $36,000 to each then each kid gets $7,200 in CESG. In that case if kid-1 (or 2) does not attend school the $7,200 would be given back to the government.
If, I only contribute $20,000 to each, each kid gets $4,000 in CESG grant. If kid-1 does not go to school then kid-1 RESP can be transferred to kid-2. Kid-2 can use all of his CESG and $3,200 from kid-1 (to get to $7,200) the $800 extra would be sent back to the government.
That being said I do not believe I am facing an issue regarding sharing either way. Reading the moneysmartblog I found this post that discusses whether family or individual plans are better.
Individual and Family Plans For 2019

The following quote was informative:
One rule which is always in effect for both types of plans is the maximum lifetime grant amount of $7200 per child.
For multiple child families it may appear at first glance that family accounts are more flexible than individual accounts however in fact they are pretty much the same thing, because the rules allow transferring money between any type of accounts. In case one of your kids doesn’t go to school, it doesn’t matter whether you have your kids in a family account or individual accounts since you are allowed to transfer money to the kid(s) who are still going to go to school in either case. I would suggest that family plans are slightly better if you have more than one child mainly because it will save on account fees and it might simplify the paper work a bit.
The first bolded section notes that you can transfer funds between kids whether in a family or joint account, if the receiving child has not maxed out his CESG he can receive a transfer from siblings to do so.
The second comment I disagree with as there are no account fees and giving each kid his own account is, in my opinion, simpler.

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