RESPs: Individual versus Family Plans

Registered Education Savings Plans (RESPs) are created to help Canadian families support their children’s post-secondary education. In general, there are two kinds of heritage education funds RESP accounts, namely the Individual Plan and the Family Plan.

Individual RESPs
As the name suggests, individual plans only have one beneficiary, which can be the subscriber himself/herself or another person named by that subscriber. Age restrictions are not a problem since this type of account doesn’t have any rules on that, but some Canadian Education Savings Grants (CESGs) only pay to beneficiaries under 18 years old.

For instance, let’s say you have an individual heritage RESP for each of your two kids. If one of them goes to grad school and the other doesn’t, you can change the beneficiary even if they are already 28 years old when they start with the grad school. As mentioned, this doesn’t include any government grant money.

Also, you can combine multiple individual plans into one family plan any time as long as the beneficiaries are related to the subscriber either by blood or adoption.

The downside appears when you have multiple individual plans in your family: more plans, more paperwork, and more relationship requirement.

Family RESPs

On the other hand, family plans can have one or more beneficiaries who must be related to the subscriber whether by blood, adoption, or marriage. That means you can sign your children, grandchildren, siblings, or other relatives (by blood, adoption, or marriage).

The beneficiaries under the family RESP must be under 21 years old at the time of registration, and they can be changed or removed throughout the plan’s course.

For individual RESPs, there’s basically no need for strict allocation of contributions. However, when it comes to family heritage RESPs, more than one beneficiary means dividing the contributions for each beneficiary.

For instance, if you’re signing up two kids with different ages, you have to divide the contributions between them, with the older child (ideally) getting a larger slice to catch up with the contributions. In case you have twins, the allocation would easily be 50% for each child.

Both the individual and family heritage RESPs follow a maximum grant amount of $7200 per child. If your children have reached the maximum grant and you opt to transfer some of the contributions to another beneficiary, you’ll lose the grant.

Choosing the Right One

If you only have one child, you may naturally choose individual RESPs. If you plan to have another child, signing up for a family account may be the better choice.

For families with two kids or more, family accounts are normally the first choice. Or you can sign up for multiple individual accounts. On the other hand, remember that these accounts may pretty much be the same thing since you can transfer contributions between accounts. For example, if one of your kids doesn’t go to school while the other does, you may transfer the contributions of the former to the latter—regardless of the type of account you have.