The concept if gifting money seems simple on the surface but a debate inevitably occurs when gifting to multiple people... equal or equitable. This becomes markedly difficult if the choice involves people you love, and their future. This month I’m going to break down the pros and cons to help you decide how to manage your RESP withdrawals between children: equal or equitable?
Defining the Options
In many situations being both equal and equitable is impossible, and a choice needs to be made. Let’s start by defining these two options.
Of the same measure, quantity, amount, or number as another. Identical in mathematical value or logical denotation: equivalent.
Giving Equally = Each child gets X dollars for school.
Dealing fairly with all concerned. Implies a less rigorous standard and usually suggests equal treatment of all concerned.
Giving Equitably = Each child gets an amount that reflects their need.
Picking the Right Fit for You
There is no wrong choice (I’ve seen both employed by various RESP holders). There is only the right one for you. It comes down to what you deem to be the priority – giving each child the same amount to go towards school or giving each child an amount that reflects their needs and situation.
* Important note about making an RESP withdrawal. RESP withdrawals are taxable – more specifically the grant and the growth in the account are taxable when withdrawn. They are taxable not to you but to the student for whom they are withdrawn. Luckily, students receive tax deductions to help offset this cost.
Other Equal vs. Equitable Situations
RESP withdrawals are not the only situation which can trigger an equal vs. equitable debate. Other scenarios that can trigger such a decision are:
- Donations to various charitable organizations
- Gifting or helping people out financially
- Inheritances & equalizing your estate between beneficiaries
- Succession planning
Ultimately, it comes down to you – what your priorities and values are, the dynamics of the situation, and what you want to do with your money.
To create a customized RESP withdrawal and gifting strategy that's right for you, contact us at KLT Wealth Management.
Courtney Beach, QAFP
