An RESP is a tax-deferred education savings plan that the federal government matches at 20¢ per $1 — up to $7,200 in grants over the child's lifetime. An in-trust account is just a regular investment account held in the child's name. The catch: RESP is locked into education spending. In-trust is unrestricted but earns no grant and pays full tax. For 99% of parents, the answer is RESP — supplemented by a small in-trust for off-plan needs.
| RESP | In-Trust | |
|---|---|---|
| Government grant (CESG) | Yes — up to $7,200 lifetime | No |
| Low-income bonus (CLB) | Up to $2,000 | No |
| Tax on growth | Tax-deferred | Taxable annually |
| Tax on withdrawal | Taxed in child's hands (often $0) | No tax on principal · capital gains taxed |
| Must be used for education? | Yes — or pay tax + return grants | No — any purpose |
| Annual contribution limit | $2,500/yr for max grant · $50K lifetime | Unlimited |
| Control of money | Subscriber keeps control | Child legally owns at age of majority |
| What happens if child doesn't go to school | Return grants · transfer to RRSP | Money goes to child anyway |
Government CESG adds 20% — $500/yr × 14.4 years = $7,200 lifetime grant max.
At 7% return, that $43,200 contributed becomes ~$92K at age 18. The child uses it for tuition/rent during a 4-year degree — and pays minimal or zero tax because their tuition credits offset the withdrawal.
Same $2,500/yr in an in-trust account at 7% taxable: ~$71K. RESP wins by $21K — purely from grants and tax deferral.