Is an RESP or in-trust account better for education savings?

An RESP is almost always better for education savings because of the 20% government grant (CESG) — that is a guaranteed, immediate 20% return on up to $2,500/year per child. In-trust accounts have no grants and gains are taxable. Use an in-trust account only after maxing RESP contributions.

What is the RESP grant?

The Canada Education Savings Grant (CESG) matches 20% of your RESP contributions, up to $500/year per child ($7,200 lifetime max). Low-income families may receive an additional 10-20% on the first $500. This is free money that only RESPs provide.

What happens if my child does not go to school?

RESP options include: transferring to a sibling, keeping the plan open for up to 35 years, rolling up to $50,000 of growth into your RRSP (if room), or closing and returning grants. In-trust accounts have no restrictions but the funds legally belong to the child at the age of majority.

Who pays tax on in-trust account gains?

Attribution rules apply: interest and dividends are taxed to the parent until the child turns 18. Capital gains are taxed in the child''s name (usually at 0% if they have no other income). This makes an in-trust account less tax-efficient than an RESP for interest and dividends.

RESP vs In-Trust Account in Canada 2026

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

→ Back to: Complete RESP Guide