Family RESP vs. Multiple Individual RESPs
I have a 2-year old child and another on the way. I previously set up an RESP for the 2-year old and have contributed $7,500 so far to get the max CESG in the first 3 years. The goal will be to at a minimum deposit the $36,000 required to get each child the $7200 CESG match. At the time we set up the account we only had 1 kid but were encouraged by our banker to make it a Family RESP account so we did.
Comparing individual to family plans it seems the only advantage to family plans is they are “easier to manage” and allow you to move non-CESG money between the two beneficiaries (if one does more schooling etc.) but I’m not sure that is necessarily true for the below reasons:
1. “Easier to manage” both plans are run on a CCP style system, more equity when children are younger sliding to more bonds/GICs as they become older. Since the kids are different ages even if I have a family plan I will still essentially be running 2 separate accounts within the plan. I could have some small savings if I notionally slide equity ETFs from older child to younger child and buy GICs with new funds later on (saving a single transaction fee) but that will get very confusing.
2. "Easier to Move money between kids" In a family plan you cannot move the $7,200 CESG between kids and with individual plans you can re-name the beneficiary if things change (no CESG can be re-assigned) so in reality the $7,200 has to be used by each child whether family or group plan and the rest can be used more by one child or the other. – please correct me if I’m wrong.
So, are there benefits to a family plan that I’m missing or would I be better of setting up a new individual plan for the 2nd child when born?
I think it would be easiest and cleanest to allow them each to have their own plan and watch it grow, then when the first starts school its’ clear how much they have to spend and we don’t accidentally spend any money of the 2nd on the 1st and vice versa.
Unrelated questions to parents who have had a plan for withdrawing from the family plan (I realize this is a long ways away).
1. Legally speaking who gets to make the call to withdraw funds; the beneficiary (child) or the subscriber (parent)? Is there anything to stop a child from enrolling in 1 semester of community college and withdrawing their entire RESP account then dropping out?
2. Parents did you make a withdrawal plan with your children as they entered post-secondary? If the child goes to a 4-year program it would seem the initial plan would be to withdrawal 1/4th per year, if by year 3 or 4 they are strongly considering a 2nd degree adjust accordingly but as I understand it you’re better taking the money out while the kid is in school (even if it goes above personal exemption) then having it trapped in the RESP after schooling is complete.
3. Parents who had a group plan did you give children who did more years (or more expensive) schooling more money or did you give each child the same? What is fairer giving each child the same amount or giving the child who spends more or school more dollars – this is not really a financial questions just one I’ve been pondering. I’m leaning towards its “fairest” to invest the same amount for each child and let them spend it (within some guidelines) as they see fit.
Comparing individual to family plans it seems the only advantage to family plans is they are “easier to manage” and allow you to move non-CESG money between the two beneficiaries (if one does more schooling etc.) but I’m not sure that is necessarily true for the below reasons:
1. “Easier to manage” both plans are run on a CCP style system, more equity when children are younger sliding to more bonds/GICs as they become older. Since the kids are different ages even if I have a family plan I will still essentially be running 2 separate accounts within the plan. I could have some small savings if I notionally slide equity ETFs from older child to younger child and buy GICs with new funds later on (saving a single transaction fee) but that will get very confusing.
2. "Easier to Move money between kids" In a family plan you cannot move the $7,200 CESG between kids and with individual plans you can re-name the beneficiary if things change (no CESG can be re-assigned) so in reality the $7,200 has to be used by each child whether family or group plan and the rest can be used more by one child or the other. – please correct me if I’m wrong.
So, are there benefits to a family plan that I’m missing or would I be better of setting up a new individual plan for the 2nd child when born?
I think it would be easiest and cleanest to allow them each to have their own plan and watch it grow, then when the first starts school its’ clear how much they have to spend and we don’t accidentally spend any money of the 2nd on the 1st and vice versa.
Unrelated questions to parents who have had a plan for withdrawing from the family plan (I realize this is a long ways away).
1. Legally speaking who gets to make the call to withdraw funds; the beneficiary (child) or the subscriber (parent)? Is there anything to stop a child from enrolling in 1 semester of community college and withdrawing their entire RESP account then dropping out?
2. Parents did you make a withdrawal plan with your children as they entered post-secondary? If the child goes to a 4-year program it would seem the initial plan would be to withdrawal 1/4th per year, if by year 3 or 4 they are strongly considering a 2nd degree adjust accordingly but as I understand it you’re better taking the money out while the kid is in school (even if it goes above personal exemption) then having it trapped in the RESP after schooling is complete.
3. Parents who had a group plan did you give children who did more years (or more expensive) schooling more money or did you give each child the same? What is fairer giving each child the same amount or giving the child who spends more or school more dollars – this is not really a financial questions just one I’ve been pondering. I’m leaning towards its “fairest” to invest the same amount for each child and let them spend it (within some guidelines) as they see fit.