Educational Planning.

Whether you're a parent, grandparent, relative or close family friend, you want to see the young people in your life succeed. And what better way to provide them with a brighter future than through access to post-secondary education. Alternatively, you may have set your sights on a post-secondary education for yourself. Recognizing the advantages that post-secondary education can bring, many adults are also considering returning to school. It's no secret that the costs of post-secondary education are rising. Being able to enjoy its many benefits can often come down to affordability. By planning ahead, you can make the dream of higher education possible. Benefit from your advisor's guidance Like all financial goals, the best way to save for higher education is by working with your financial advisor. Your advisor can help you quantify your education-savings needs and sort through the various options to develop a plan that balances your education-savings goals with your other financial priorities. This guide can help you fully benefit from your advisor's knowledge and expertise as you save for education. You'll find the tools and checklists useful for gathering information, raising questions and identifying issues that may influence your plan. Why get started now? Putting off saving for education will always be tempting. After all, the time when money will be needed can seem like a long way off and there's always something else to spend the money on. But if you want to make saving for education more affordable, the best way is to start saving right away.   Finding your education-saving needs How much will post-secondary education cost you? The answer to this question will depend on many factors. To come up with a reasonable assessment, look to your advisor for help. Whether you're saving for your own children, those of a relative or friend, or are planning to go back to school yourself, count on your advisor's financial expertise to help you accurately assess your education-savings needs. With this information you can decide what is a reasonable goal given your situation, and then plan accordingly. Examine your expectations Your costs will depend on the number of children involved and their ages, whether they will be able to live at home while going to school, the length of time of the program and the institution attended. Through this process you may discover that studying abroad is beyond your means but attending a local school is easily affordable. Similarly, you may have other sources of financial support such as inheritances or contributions from relatives, friends or even your employer, that can help make your post-secondary education goals achievable. In addition, there may be potential for scholarships, bursaries and other forms of financial aid. Sharing information with your advisor Tallying up the costs checklist (PDF) can help you assess your current expectations for post-secondary education and your potential savings needs. By sharing this information with your advisor and discussing your options, you can decide what is realistic and determine a reasonable estimate of your projected education costs. Keep in mind that the total you come up with is only an estimate and should be refined with your advisor's assistance as your education-savings needs become more clearly defined. Investing in education pays off How valuable is a post-secondary education? According to Statistics Canada, it's an excellent investment that can translate into stronger employment earnings. The average annual income for Canadians holding a university degree far exceeds those with a lesser education. Higher education translates into higher earnings Level of education Average annual income Some Secondary school $21,230 Secondary School Graduation Certificate and/or some post-secondary $26,838 University degree $48,648 Source: Statistics Canada, Census of Population. Last modified: 2004-09-01. 2001 Census. Your Options There are plenty of ways to save for education. Count on your advisor to help you find the ones that make the most sense for your situation. Today, education-savings options range from a simple savings account to the more complex formal trust account. Somewhere in the middle lies Registered Education Savings Plans (RESPs*) and "informal" trust accounts. All of the options offer specific advantages and have certain limitations so it's important to review them carefully with your advisor. Depending on your situation, you may need to use more than one type of plan to achieve your education-savings goals. Prepare for an informed discussion Your education-savings options listed below offer a summary of the main advantages and potential limitations of the various options. It also indicates which individuals each option is suitable for, as well as any special considerations. Be sure to review these options and make a list of questions to ask your advisor. By preparing in advance, you'll be ready to have an informed discussion regarding potential options and their suitability to your specific education-savings needs. YOUR EDUCATION SAVINGS OPTIONS Registered Education Saving Plans (RESP) Non-registered investment account Informal “In trust for” account Formal Trust Account Lifelong Learning Plan (LLP)

Government of Canada Financial Assisted Plans

• Registered Education Savings Plans (RESPs)

A Registered Education Savings Plan (RESP) is a contract between an individual who is the subscriber, and a person or organization, who is the promoter. The subscriber (or a person acting for the subscriber) makes contributions to the RESP, which earns income. The subscriber names one or more beneficiaries and agrees to make contributions for them.

How an RESP works
The subscriber (or a person acting for the subscriber) generally makes contributions to the RESP. Subscribers cannot deduct their contributions from their income on their tax return. If not paid out to the beneficiary, the contributions are usually paid by the promoter to the subscriber at the end of the contract. Subscribers do not have to include the contributions in their income when they get them back.
The promoter usually pays the contributions to the beneficiaries. Income earned on the contributions is paid to the beneficiaries in the form of educational assistance payments (EAPs). Beneficiaries include the EAPs, but not the contributions, in their income for the year in which they receive them from the RESP.
The Canada Revenue Agency registers the education savings plan contract as an RESP, and lifetime limits are set by the Income Tax Act on the amount that can be contributed for each beneficiary. Unless the RESP is a specified plan the RESP must provide that no contributions (except transfers from another RESP) may be made to the plan at any time after the end of the year that includes the 31st anniversary of the opening of the plan. Furthermore the plan has to be completed by the end of the year that includes the 35th anniversary of the opening of the plan, unless it is a specified plan.
Here is an overview of how an RESP generally works.

• A subscriber enters into an RESP contract with the promoter and names one or more beneficiaries under the plan.
• The subscriber makes contributions to the RESP. Government grants (if applicable) will be paid to the RESP. These grants can be the Canada Education Savings Grant, Canada Learning Bond, or any designated provincial education savings program.
• The promoter of the RESP administers all amounts paid into the RESP. As long as the income stays in the RESP, it is not taxable. The promoter also makes sure payments from the RESP are made according to the terms of the RESP.
• The promoter can return the subscriber’s contributions tax-free.
• The promoter can make payments to the beneficiary to help finance his or her post-secondary education.
• The promoter can make accumulated income payments.

Canada Education Savings Grant (CESG)
Human Resources and Skills Development Canada (HRSDC) provides an incentive for parents, family and friends to save for a child's post-secondary education by paying a grant based on the amount contributed to an RESP for the child. The CESG money will be deposited directly into the child's RESP.
No matter what your family income is, HRSDC pays a basic CESG of 20% of annual contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.
HRSDC will also pay an additional CESG amount for each qualifying beneficiary. The additional amount is based on your net family income and can change over time as your net family income changes.
For 2009, the additional CESG rate on the first $500 contributed to an RESP for a beneficiary who is a child under 18 years of age is:

• 40% (extra 20% on the first $500) if the child's family has qualifying net income for the year of $38,832* or less; and
• 30% (extra 10% on the first $500) if the child's family has qualifying net income for the year that is more than $38,832* but is less than $77,769*

* These amounts are updated each year based on the rate of inflation.
The qualifying net income of the child's family for a year will generally be the same as the income used to determine eligibility for the Canada Child Tax Benefit (CCTB).
Beneficiaries qualify for a grant on the contributions made on their behalf before the end of the calendar year in which they turn 17 years of age.
However, since the CESG has been designed to encourage long term savings for post-secondary education, there are specific contributions requirements for beneficiaries who attain 16 or 17 years of age. RESPs for beneficiaries 16 and 17 years of age can only receive CESG if at least on of the following two conditions is met:

• a minimum of $2,000 of contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary before the year in which the beneficiary attains 16 years of age; or
• a minimum of $100 of annual contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary in at least any four years before the year in which the beneficiary attains 16 years of age.

This means that you must start to save in RESPs for your child before the end of the calendar year in which the beneficiary attains 15 years of age in order to be eligible for the CESG. The CESG and accumulated earnings will be part of the educational assistance payment paid out of the RESP to the beneficiary.
If the beneficiary does not pursue post-secondary education the CESG is returned to the government.

• Lifelong Learning Plan

The Lifelong Learning Plan (LLP) allows you to withdraw amounts from RRSPs to finance training or education for you or your spouse or common-law partner. You cannot use the RRSP funds to finance your children's training or education, or the training or education of your spouse or common-law partner's children.
Conditions for participating in the Lifelong Learning Plan
ALL of the following conditions must apply:

• The student must be a full-time student (or a part-time student if he or she meets the disability conditions).
• You (the RRSP owner) have to be a resident of Canada.
• The student has to enrol in a qualifying educational program at a designated educational institution.
• The participation in the Lifelong Learning Plan (LLP) has to be done before the end of the year the student reaches the age of 71 years old.

You are responsible for making sure that all LLP conditions are met. If a condition is not met while you are participating in the plan, your RRSP withdrawal will not be considered eligible. You will have to include the RRSP withdrawal as income on your income tax return for the year you received the funds.
If you meet the conditions for participating in the LLP when you make a withdrawal from your RRSP, you can do the following:

• Participate in the plan as many times as you wish over your lifetime. Starting the year after you bring your LLP balance to zero, you can participate in the plan.
• Participate in the LLP at the same time as your spouse or common-law partner. You can use the LLP for either or both of you.
• Participate in the LLP even if you have withdrawn amounts from your RRSP under the Home Buyers' Plan (HBP) that have not been fully repaid.

Participating in the Lifelong Learning Plan
Send a request to withdraw funds to your RRSP issuer
Fill out Form RC96, Lifelong Learning Plan (LLP) - Request to Withdraw Funds From an RRSP, for each RRSP withdrawal that you make. After completing Part 1, give the form to your RRSP issuer, who will complete Part 2. Your RRSP issuer will not withhold tax from the funds you withdraw if you meet the LLP conditions.

• If you do not have an RRSP, you cannot set one up and then make a withdrawal right away. The contribution has to be in the RRSP for 90 days before you can deduct it from your income on your tax return.
• If you have an RRSP and you withdraw funds within 89 days of your contribution, you may not be able to deduct the full contribution from your income. To determine if part of the contribution is not deductible for any year, use the appendix in the LLP guide.

You can withdraw up to a total of $20,000 from you RRSPs.

• Annual limit: $10,000
• Total plan limit: $20,000

You can participate in the LLP for yourself while your spouse or common-law partner participates in the LLP for him or herself. You can both participate in the LLP for one of you or you can participate in the LLP for each other. Each of you can withdraw up to the annual LLP limit of $10,000 in a year, and up to the total LLP limit of $20,000 over the period you are participating in the LLP.
The amount you withdraw is not limited to the amount of your tuition or other education expenses.
You can keep withdrawing amounts from your RRSPs until January of the fourth year after the year you made your first withdrawal, as long as you meet the qualifying LLP conditions every year.
You cannot withdraw more than $20,000 each time you participate in the LLP. This is your total plan limit. You can participate in the plan again, starting the year after you repay your RRSP withdrawals, so that the balance you owe is zero.
If you withdraw more than the annual limit of $10,000, you must include the excess in your income for the year of the withdrawal. The excess does not reduce your total plan limit of $20,000.
If you withdraw more than the total plan limit of $20,000, you must include the excess in your income for the year you exceed the total limit.
Your RRSP issuer will send you a T4RSP, Statement of RRSP Income, showing the amount you withdrew under the LLP.
Completing your tax return
Starting in the year you make your first LLP withdrawal, you must send us a completed return every year until you have repaid all LLP withdrawals or included them in your income. You have to send us a return even if you do not owe any tax. Attach to your return the T4RSP slips that your RRSP issuer sends to you for your LLP withdrawals.
Complete Schedule 7, RRSP Unused Contributions, Transfers, and HBP or LLP Activities, to show your total LLP withdrawals and repayments for the year. Attach Schedule 7 to your return.
Forms and publications

• Guide RC4112, Lifelong Learning Plan (LLP)
• Form RC96, Lifelong Learning Plan (LLP) - Request to withdraw funds from an RRSP