RESP Guide
CESG also known as Canadian educational savings grant is provided by Government in RESP plan. There are few highly concerned questions and the answers relevant for RESP and also relating to CESG which are discussed below:
5 frequently asked questions about the CESG
- What are the qualifications required for the CESG Grant?
The beneficiary is eligible for CESG and he or she –
- Should be Canadian at the time of the RESP contribution
- Should have a Social Insurance Number (SIN)
- Should be below the age of 17 years
- In case if the child is between the age of 15 and 17 years and needed to get CESG after the age of 15 years then you need to follow the rules. Total contributions made should be $2,000 or annual contribution should be made of $100 or more in any of last four years.
- How to apply for the CESG grant?
The government will not grant you for CESG plan unless you make a request to get the grant. Apply for the CESG immediately after you start investing for RESP.
Following are the steps required to apply for CESG grant
- Fill and complete the CESG application form and including the beneficiary’s SIN.
- Submit the insurance plan along with the grant application form to the Human Resources and Skills Development Canada (HRSDC).
- How is the CESG grant paid?
The government will pay the CESG grant to your investments in RESP, only after the insurance company submits all the information about your contribution to the government.
- How CESG contribution works on investment?
The CESG contribution is mainly based on the investment instructions established on RESP setup which works according to the plan. CESG contribution does not have any other investment restrictions.
- What happens when I do not make use of my CESG contribution?
For RESP, there is no annual limit and it makes you to contribute as much as you can for the given upper limit of $50,000. The first payment of $2,500 will get the annual CESG of maximum $500. In case, if you invest less than $2,500 for the given year then you will not get the CESG contribution of $500 but it will be carried forward for the next payment option. It will be made available for the first $2,500 investment option.
For example, when the contribution you make is of $1,000 for RESP for the current year, it will get $200 of CESG ($1,000x 20%). The amount 1,500 will be left without getting CESG contribution ($2,500 – $1,000) and which will be available for the next year.
In the following year, if you contribute $4,000 for RESP then the contribution from CESG which is carried forward from last year – when you paid only $1,500 and added to the contribution $4,000 of present year. The CESG contribution that you will receive is of $800 ($4,000 x 20%).
The maximum contribution that you would have received is $1,000 on the investment of $5,000 but because you have used the CESG contribution partly on the previous year, you will get the CESG contribution $800 instead of $1,000 this year.
If you contribute less than $2,500 annually for too many years, then you will lose part of your grant entitlement.
Munish mehan arranges RESP for people who understand the value of education for their children.
You can reach him at insurance.munishmehan@gmail.com
