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Kenneth C. Pope, Henson Trust Specialist

Using Registered Education Savings Plans For a Child with Developmental Disabilities

One of the most interesting phenomenon of parenting is that from the moment of birth onwards we enter into an process of attempting to ensure that the best interests of our children are given careful consideration.
Although we have no way of knowing what the future will hold for them, we attempt to provide a healthy, loving environment in which they have the opportunity to develop to their fullest potential. We do our very best to help them open the doors which will provide them with the opportunities to continue learning.
Children with developmental difficulties may not be interested in attending or able to attend university or college. This does not preclude their ability to develop other interests and skills through alternative post secondary educational opportunities.

What is an RESP ?

Registered Education Savings Plans facilitate a method of saving for post secondary learning experiences by allowing you to earn investment income, in a tax deferred environment.
Changes made to the rules governing RESPs, have made it easier for students with disabilities to benefit from the educational assistance payments generated from the income earned in an RESP.
Individual plans can be set up for the benefit of an individual beneficiary while Family plans accept contributions for more than one beneficiary.
The maximum annual contribution to an RESP is $4000.00 for each beneficiary. These contributions are not tax deductible. The Federal government provides a grant of 20 cents for each dollar contributed, up to a maximum of $400.00 each year and a lifetime limit of $7,200.00 Recently they have announced that there will be an additional grant for families with an income below $70,000.The grant on the first $500 contributed will be 40% for families with incomes below $35,000 and 30% for families with incomes between $35,000 and $70,000.Contributions can be made for a period of 21 years and the maximum contributions for each beneficiary are limited to $42,000.00. An RESP must be terminated by the end of the year that includes the 25th anniversary of the plan.

What if my child can’t make use of the RESP 25 years from now?

Parents have always had the assurance that if their child was not interested in, or able to, pursue post-secondary education, their capital contributions to the savings plan would be returned to them tax free. However, parents who invest in an RESP now have the additional assurance that if their child does not pursue further education, up to $50,000 of the income that accumulates in the RESP can be transferred into their RRSPs, to the extent that they have unused contribution room available. Alternatively, parents can withdraw the RESP income and pay tax at their marginal rate plus an additional 20%, to offset the interest earned on the grant. The grant portion is returned to the federal government.

It is now also possible to roll over the educational assistance payments, without tax implications, to another family member, so long as the beneficiary is under 21 years of age and is related by blood or adoption. In the case of an RESP in the family plan format, educational assistance payments can be paid out to another family member as long as the same qualifying criteria are followed.

Where may a child go to school, and what course of study or training can be involved?

In order to disburse the funds from the RESP for the students benefit, the education facility you choose for your child’s post secondary education must be a “designated educational institution”, with a “qualifying educational program”.
What this means is that the school qualifies for the Canada Student Loans program or has been certified by the Minister of Human Resources as an educational institution that will provide courses that furnish or improve skills in an occupation or vocation.
A “qualifying educational program” means a program of not less than 3 consecutive weeks that provide that each student taking the program spend not less than 10 hrs per week on courses or work in the program. The in class portion of a recognized apprenticeship can also be included.
There are a huge variety of courses offered at post secondary schools, which either qualify under the Canada Student Loans program or are sanctioned by the Minister of Human Resources.
To explore options for courses of study visit www.canlearn.ca

Although students with developmental difficulties face a number of challenges, most post secondary learning facilities offer exceptional services for students with disabilities.
Recently I was in touch with a young man who has autism spectrum disorder. He graciously shared a little of his post secondary learning experience with me. As a student attending Algonquin Community College in Ottawa, he began his study program in Mechanical Engineering Technology. After he completed his first year he decided to change his focus of studies to the Architectural Technician program. His goal is to build on the skills he has already developed and to gain more experience in the field of Architecture. He told me that he learns best through visual means, such as notes on the board or pictures. When asked, “what suggestions would you give to someone in a similar situation to yourself?” His response was “ I would encourage them to keep trying to meet their dreams and goals, and do not be afraid to ask for help”.

Through the “Centre for Students with Disabilities” at Algonquin College, this young man received:

Once the money from the RESP has been distributed to the beneficiary, the income earned in the plan, plus the amount of federal contributions, are taxed as income of the beneficiary. As a student your child will probably not have much other taxable income and will be eligible for the tuition and education tax credits, therefore he or she will have little to pay in taxes.

Ontario Disability Support Payments, (ODSP) continue to be received by the child while completing their education, and these payments are considered non-taxable income. RESP funds used to pay for food and shelter would be off set against ODSP, but the RESP funds used for tuition and books would not. In practice, this means food and shelter need not be paid for from the RESP funds, therefore more money is available for tuition expenses.

In order to make post secondary studies more attainable students with disabilities now have the option to attend school on a part time basis, they can access distance education courses through correspondence, take part in on-line learning opportunities, or they can learn through a variety of apprenticeship programs.

Registered Education Savings Plans are a practical tool, which can be utilized for systematically saving funds, to provide for a wide variety of possible post secondary learning experiences, both for able students and for those who face a variety of developmental and cognitive challenges.