What is a characteristic of a Registered Education Savings Plan (RESP)?

What is a characteristic of a Registered Education Savings Plan (RESP)?

• A. RESPs cannot be established for unrelated individuals.
• B. Earnings can be withdrawn if the beneficiary does not attend post-secondary education.
• C. Contributions cannot be made for beneficiaries over age 21.
• D. Interest on RESP contribution loans is tax deductible.

Answer: (B)

The characteristic that accurately describes a Registered Education Savings Plan (RESP) is that earnings can be withdrawn if the beneficiary does not attend post-secondary education, but with certain conditions. Specifically, the earnings are subject to taxes and a potential penalty when withdrawn, which is an important aspect to understand. In an RESP, the contributions made by the subscriber (the person saving for the child's education) are not tax-deductible, and the government provides Canada Education Savings Grants (CESGs) based on contributions, which grow tax-free until withdrawn. If the beneficiary chooses not to pursue post-secondary education, the funds can still be accessed, but the associated earnings will be taxed as income to the subscriber or beneficiary upon withdrawal. This feature is significant as it demonstrates the flexibility of RESPs while also highlighting the tax implications of not utilizing the funds for their intended purpose. Understanding this allows individuals to make informed decisions regarding the use of RESP funds and the consequences of not pursuing post-secondary education. The other characteristics do not hold true for RESPs: RELPs can be established for unrelated individuals, contributions can be made for beneficiaries up to 31 years old, and interest on loans specifically taken to fund contributions to RESPs is not tax-deductible in the same way as

The characteristic that accurately describes a Registered Education Savings Plan (RESP) is that earnings can be withdrawn if the beneficiary does not attend post-secondary education, but with certain conditions. Specifically, the earnings are subject to taxes and a potential penalty when withdrawn, which is an important aspect to understand.

In an RESP, the contributions made by the subscriber (the person saving for the child's education) are not tax-deductible, and the government provides Canada Education Savings Grants (CESGs) based on contributions, which grow tax-free until withdrawn. If the beneficiary chooses not to pursue post-secondary education, the funds can still be accessed, but the associated earnings will be taxed as income to the subscriber or beneficiary upon withdrawal.

This feature is significant as it demonstrates the flexibility of RESPs while also highlighting the tax implications of not utilizing the funds for their intended purpose. Understanding this allows individuals to make informed decisions regarding the use of RESP funds and the consequences of not pursuing post-secondary education.

The other characteristics do not hold true for RESPs: RELPs can be established for unrelated individuals, contributions can be made for beneficiaries up to 31 years old, and interest on loans specifically taken to fund contributions to RESPs is not tax-deductible in the same way as