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Your Money Matters
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Two
major changes have occurred in 2007 concerning the contribution
rules for RESPs: the elimination of the $4000 annual RESP
contribution limit and the increase of the lifetime RESP
contribution limit to $50000 from $42000.
The Canada Education Savings
Grant (CESG) rules are also changing. The maximum annual
contribution that will qualify for the CESG will be increased to
$2500 from $2000. Since 20% of this amount is contributed by the
government in the form of a grant, this increases the maximum annual
CESG per beneficiary to $500 from $400 per year.
CESGs
are retroactive to 1998, so a beneficiary who did not receive a
grant in a prior year can now collect up to a maximum of $1000 of
CESGs in one year based on a $5000 RESP contribution. However, the
$7200 maximum lifetime CESG remains unchanged.
The
new ability to contribute a lump-sum of up to $50000 (up from the
previous $4000 limit) in a single year to an RESP opens up a new
opportunity for those who have the cash to jump-start a child’s
post-secondary education savings. The problem with that is that you
waive your ability to collect CESGs in future years. In other words,
for a parent who has never opened an RESP for a child, a
contribution of $50,000 to an RESP today entitles the child to the
2007 CESG, for a total of $1000. No future CESGs would be available.
Theresa Wever and the Money
Concepts Team.
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