Quick Comparison
| Feature | RESP | In-Trust (Informal Trust) Account |
|---|---|---|
| Government grants | Yes (20% CESG + CLB) | No |
| Tax-deferred growth | Yes | No (attribution rules) |
| Tax on withdrawals | Taxed in child’s hands (low/no tax) | Capital gains in child’s name; interest/dividends attributed to parent |
| Contribution limit | $50,000 lifetime per child | No limit |
| Must be used for education | Yes (for grant portion) | No restrictions |
| Funds belong to | Subscriber (you) | Child (at age of majority) |
| Impact on student financial aid | May reduce need-based aid | No impact typically |
| Flexibility | Moderate (education-focused) | Very high |
| Best for | Education savings (primary) | Savings beyond RESP limit, non-education goals |
Government Grants (RESP Only)
| Grant | Amount | Eligibility |
|---|---|---|
| Canada Education Savings Grant (CESG) | 20% of contributions, up to $500/year | All Canadian children |
| Additional CESG (low income) | Extra 10-20% on first $500 | Family income under $53,358 |
| Canada Learning Bond (CLB) | $500 initial + $100/year (up to $2,000) | Low-income families (no contribution needed) |
| Provincial grants (BC, Quebec) | $1,200 (BC BCTESG), varies (Quebec) | Province-specific |
| Max lifetime CESG | $7,200 | Per child |
Value of CESG Over Time
| Contribution/Year | CESG/Year | Years Contributing | Total CESG | Growth at 6% (18 years) |
|---|---|---|---|---|
| $2,500 | $500 | 14 years (to max $7,200) | $7,200 | ~$13,500 |
| $2,500 | $500 | 18 years (no more after $7,200) | $7,200 | ~$13,500 |
The CESG alone can grow to $13,500+ by the time your child turns 18. This is free money only available through an RESP.
Tax Treatment Comparison
RESP Tax Treatment
| Component | Tax Treatment |
|---|---|
| Contributions | Not tax-deductible (contributed with after-tax dollars) |
| Investment growth | Tax-deferred until withdrawal |
| Withdrawals — contributions | Tax-free (return of your money) |
| Withdrawals — grants + growth (EAP) | Taxed in student’s hands |
| Student’s typical tax on EAP | $0-$2,000 (students have low income) |
In-Trust Account Tax Treatment
| Component | Tax Treatment |
|---|---|
| Contributions | Not tax-deductible |
| Interest income | Attributed to parent (taxed at parent’s rate) |
| Dividend income | Attributed to parent (taxed at parent’s rate) |
| Capital gains | Taxed in child’s name (usually $0 if no income) |
| Withdrawals | No restrictions, but child owns assets at majority |
Tax Comparison Example ($5,000/year for 18 years, 6% return)
| Factor | RESP | In-Trust Account |
|---|---|---|
| Total contributions | $90,000 | $90,000 |
| CESG grants | $7,200 | $0 |
| Growth (18 years) | ~$84,000 | ~$72,000 (same return, no grants to compound) |
| Total at age 18 | ~$181,000 | ~$162,000 |
| Tax on growth (student) | ~$0-$3,000 | ~$8,000-$15,000+ (parent’s rate on interest/dividends) |
| Net after tax | ~$178,000-$181,000 | ~$147,000-$154,000 |
| RESP advantage | ~$24,000-$34,000 |
What Happens if the Child Doesn’t Attend Post-Secondary
RESP Options
| Option | Details |
|---|---|
| Keep the plan open | RESP can stay open for 35 years — child may go later |
| Transfer to sibling | Move plan to another child (grants stay) |
| Roll growth into your RRSP | Up to $50,000 (if you have contribution room) |
| Close the plan | Contributions returned tax-free; grants returned to government; growth taxed at your rate + 20% penalty |
In-Trust Account
| Situation | What Happens |
|---|---|
| Child doesn’t attend school | Funds are still theirs — no restrictions |
| Child reaches age of majority | They legally own the assets |
| You want the money back | You cannot — it belongs to the child |
When to Use Each Account
Use RESP For
| Situation | Why |
|---|---|
| Education savings (primary) | 20% government grant is unmatched |
| Any child under 17 | Need to contribute before age 15 for CESG |
| Low-income families | Canada Learning Bond adds $500+ free |
| University, college, or trades | RESP covers all post-secondary |
| Want tax-efficient growth | Tax-deferred and taxed in student’s low-bracket hands |
Use In-Trust Account For
| Situation | Why |
|---|---|
| After maxing RESP ($50,000 lifetime) | In-trust has no contribution limit |
| Non-education savings for child | RESP requires education for EAP |
| Teaching children about investing | In-trust is simpler and more visible |
| Saving for child’s car, travel, business | Flexible — no restrictions on use |
| Capital gains strategy | Growth stocks, capital gains taxed in child’s name |
Use Both Together (Ideal Strategy)
| Priority | Account | Contribution |
|---|---|---|
| 1st | RESP | $2,500/year (to maximize $500 CESG) |
| 2nd | RESP (more if possible) | Up to $50,000 lifetime |
| 3rd | In-trust account | Any additional education/child savings |
| Alternative | TFSA (parent’s) | More flexible, tax-free, funds stay yours |
Best RESP Providers
| Provider | Type | Fees | Best For |
|---|---|---|---|
| Wealthsimple | Robo-advisor | 0.40-0.50% + ETF MER | Hands-off, automatic |
| Questrade (Questwealth) | Robo / self-directed | 0.25% (robo) or $0 ETF buys | Cost-conscious |
| Justwealth | Robo-advisor | 0.50% | Target-date RESP portfolios |
| TD Direct Investing | Self-directed | $9.99/trade | Bank integration |
| RBC InvestEase | Robo-advisor | 0.50% | RBC customers |
| Avoid: Group RESPs | Group plan | High fees, restrictions | Avoid these |
In-Trust Account Tips
| Tip | Details |
|---|---|
| Focus on growth stocks/ETFs | Capital gains taxed in child’s name (low/no tax) |
| Avoid interest-bearing assets | Interest attributed to parent (high tax) |
| Document contributions clearly | Track who contributed what for tax purposes |
| Use an all-equity ETF (XEQT, VEQT) | Growth focus, minimal distributions |
| Understand: child owns assets at 18/19 | You lose control — some parents prefer TFSA instead |
| Consider formal trust if concerned | Gives more control but costs more to set up |