Financially Speaking

Know your RESP and other options to get the most for your child

You want the best for your disabled child – and that includes a post-secondary education to give them a strong start in their adult life – so you’ve probably already started saving for that day down the road when they’ll head off to college or university. You may even have set up a Registered Education Savings Plan (RESP) for your child – and that’s always a good savings strategy – but you might not be taking full advantage of the benefits of your RESP or have all the info you need to access other savings and grant options that can significantly add to your child’s education nest egg. So here’s a quick rundown of the educational funding issues and options for disabled children.

The basics of an RESP

Taxes on the earnings inside an RESP are payable in the hands of the child and are deferred until the child withdraws the money while attending a post-secondary institution.  Currently, a lifetime maximum of $50,000 can be contributed per child. An RESP also offers the added incentive of ‘free’ government money in the form of the Canada Education Savings Grant (CESG)  program that provides a minimum 20 per cent top-up grant to the first $2,500 contributed each year, which could add as much as $7,200 in extra capital over time. Additional grants may also be available to RESP holders through the Canada Learning Bond (CLB) and various provincial programs.i

The added value of an RESP for a disabled child

An RESP for a disabled beneficiary who is eligible for the disability tax credit must be collapsed at the end of the 30th year after it was started. This means that you have five extra years to continue contributing to your child’s RESP and enjoy the considerable added value that comes from the magic of compounding inside a tax-deferred plan.  A disabled student can also claim the non-refundable education income tax credit of $400 per month of studies, even if the student does not meet the full-time attendance requirement.

Government sources of educational funding

When a disabled child is ready for college or university, they may qualify for the Canada Study and/or Access Grants funded by the Government of Canada. They may also be eligible for assistance from provincial bursary programs.

• The Canada Study Grant for the Accommodation of Students with Permanent Disabilities can provide up to $8,000 per loan per year to help pay for exceptional education-related costs associated with a disability. These costs my include tutors, or sign interpreters, attendant care for studies, specialized transportation (to and from school only), learning disability assessments, not takers, readers and braillers.

• The Canada Access Grant for Students with Permanent Disabilities is awarded to full-time and part-time students with permanent disabilities who have demonstrated financial need. It is intended to assist in covering the costs of accommodation, tuition, books, and other education-related expenses up to $2,000 per loan year.

• Contact your provincial student aid authority to find out more about programs available in your province.

Scholarships, awards and bursaries

To further complement education savings, investigate the many scholarships, awards and bursaries available through non-governmental associations and the schools themselves.

• Associations such as the Learning Disabilities Association of Canada and the Association of Universities and Colleges of Canada offer various awards.

• Contact the Awards office at your college or university of choice.

• A Financial Aid Directory is available through the National Educational Association of Disabled Students (NEADS) www.neads.ca.

Other Investment options

You need every advantage you can get when saving to help your children pay for a post-secondary education. Consider non-registered investment strategies that can deliver important savings beyond RESPs.

• Most people think of life insurance as basic financial protection for loved ones but a universal life insurance policy can also help fund your child’s education.

• A properly structured age 40 trust can be an effective means of accumulating capital for education. With this strategy, it is important to keep in mind government assistance guidelines.

• Tax-advantaged mutual funds and monthly income portfolios are mutual fund options for education savings.

It is important to put educational and financial plans in place as early as possible. We can help establish a well-designed program that will consider the many available options, help your children reach their full potential and help you to achieve your hopes for their future.