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Registered Education Savings Plans - Sample Questions

Posted by David Gobeil on

This question on RESPs is about as mathematical as you can get. We like financial calculators.

On August 4, 2018, Matthew will be 5 years of age. By the end of 2029, his father, Gerry, would like to accumulate $50,000 in an RESP for Matthew. At the end of each year, Gerry will contribute to the RESP and he expects that the investments within the RESP will earn 8%. Mathew will not be eligible for the Canada Learning Bonds nor the enhanced CESG rates.

Gerry's annual contribution would be:

(A)

$2,096

(B) 

$2,196

(C)

$2,296

(D)

$2,396

This question on RESPs does not require much consideration of numbers.

Gerry and Anna have been married for four years. This week, they celebrated the birth of their first child, a daughter whom they named Erin. Gerry has $50,000 that he wants to invest for Erin's education. They do not expect that Erin will be eligible for Canada Learning Bonds or the enhanced CESG rates.

What should Gerry do?

(A)

Purchase a universal life policy with enough life insurance on Gerry's life, so as to enable a contribution of $50,000; and upon Erin attaining 18 years of age, change the life insured to Erin, transfer ownership of the policy to Erin and have Erin withdraw the funds for her education.

(B)

Establish an individual RESP for Erin and contribute $50,000.

(C)

Establish an in-trust brokerage account for Erin with $50,000 and invest the funds in equities.

(D) 

Establish an in-trust brokerage account for Erin with $47,500; invest the funds in equities; establish an individual RESP for Erin and contribute $2,500; in each the 13 subsequent years, transfer $2,500 to the RESP; and in year 15, transfer $1,000 to the RESP.

 You will find the answers in our next Blog post.


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