Question 1

What is the RESP contribution limit in Canada?

Accepted Answer

There is no annual RESP contribution limit in Canada. The lifetime limit is $50,000 per beneficiary. The Canada Education Savings Grant pays 20% on the first $2,500 contributed each year — $500 annually, up to $7,200 per beneficiary for life. Contributing more than $2,500 in a year does not earn extra grant. Contributions above $50,000 per beneficiary attract a 1% per month over-contribution penalty until withdrawn. Unused CESG room carries forward, so a catch-up year can claim a maximum of $1,000 of grant on a $5,000 contribution — never more.

Question 2

Can you transfer an RESP to another bank or advisor?

Accepted Answer

Yes. An RESP can be transferred between promoters without collapsing the plan or repaying the Canada Education Savings Grant, provided the transfer is a qualifying transfer — the same beneficiary, or a sibling under 21 for family plans. The receiving institution files the transfer forms; the grant and accumulated income move with it. A non-qualifying transfer forces repayment of the CESG and can trigger tax on accumulated income. Most losses on an RESP transfer are not tax — they are the departing institution's deferred sales charges or the receiving fund's fees, which is why the fee comparison matters more than the transfer paperwork.

Question 3

What are typical RESP fees in Canada?

Accepted Answer

Most Canadian bank-branch RESPs hold mutual funds with management expense ratios between 1.8% and 2.4% per year. Robo-advisors run roughly 0.5% to 0.7% all-in, and self-directed ETF portfolios run 0.05% to 0.25%. Over an 18-year RESP, a one-percentage-point fee difference commonly costs several thousand dollars of final value.

Question 4

Is an RPP the same as a LIRA?

Accepted Answer

No. A Registered Pension Plan is the employer plan you contribute to while working. A Locked-In Retirement Account is where that pension money goes if you leave the employer and take the commuted value out. The LIRA is your own account, but it stays locked in under pension law until a qualifying age or unlocking rule applies. In Ontario, LIRA funds are governed by the Pension Benefits Act and administered by FSRA. You generally cannot withdraw cash directly from a LIRA — it must first be converted to a LIF or an annuity, typically from age 55.

Question 5

When can you convert a LIRA to a LIF in Ontario?

Accepted Answer

In Ontario you can generally convert a LIRA to a Life Income Fund from age 55, and you must convert by the end of the year you turn 71. A LIF has both a minimum withdrawal, set by the same table as a RRIF, and a maximum withdrawal set by pension law. Ontario also allows a one-time 50% unlocking within 60 days of transfer.

Question 6

Why is part of a commuted value taxable immediately?

Accepted Answer

Section 8517 of the Income Tax Regulations caps how much of a commuted value can be transferred into a locked-in account on a tax-deferred basis. The amount above that maximum transfer value must be paid to you in cash and is fully taxable in the year received, unless you have RRSP room available to shelter it.

Question 7

What rate of return does a commuted value need to beat the pension?

Accepted Answer

It is the annual return your transferred lump sum would have to earn, after fees, to reproduce the pension's lifetime income to the same age. For most Ontario plans it lands between roughly 4% and 9% depending on your age, the indexing in the plan, and how much of the payout is taxable immediately. Below your number, staying in the plan usually wins.

Question 8

What is the small business tax rate in Ontario?

Accepted Answer

An Ontario CCPC pays a combined federal and provincial rate of 12.2% on the first $500,000 of active business income, versus 26.5% on income above that threshold. The gap is why retained earnings inside a corporation compound faster than personally held income, and why the order you pay salary versus dividends matters.

Question 9

How does passive income reduce the small business deduction?

Accepted Answer

Once a corporation earns more than $50,000 of passive investment income in a year, its small business deduction limit is reduced by $5 for every $1 above that threshold, and is eliminated entirely at $150,000. That can push active business income from a 12.2% rate to 26.5% in Ontario, so where retained earnings are invested matters.

Question 10

What do group benefits cost per employee in Ontario?

Accepted Answer

A typical Ontario small-business group benefits plan costs roughly $1,800 to $4,200 per employee per year, depending on the coverage chosen, the age profile of the group and whether dental and disability are included. Employer-paid premiums are generally a deductible business expense, which lowers the true cost relative to an equivalent salary increase.

Question 11

What is the deemed disposition tax at death in Canada?

Accepted Answer

At death you are treated as having sold all capital property at fair market value. Half of the resulting capital gain is taxable on your final return, and registered accounts are generally fully taxable unless they roll to a spouse. For rental portfolios and cottages, that bill often arrives before any property can be sold to pay it.

Question 12

Is a life insurance payout taxable in Canada?

Accepted Answer

No. A life insurance death benefit is received tax-free by a named beneficiary in Canada. When a corporation owns the policy, the death benefit less the policy's adjusted cost basis credits the capital dividend account, which allows the corporation to pay that amount out to shareholders tax-free.

Straight answers, with the rule and the source.

RESP & education