The Lifelong Learning Plan
A lifetime of education opportunities
Have you ever thought about going back to school as an adult, but wondered how you would be able to afford it? In this post, we look at using money from an RRSP to finance a Lifelong Learning Plan. Click here for a comprehensive overview.
What is the Lifelong Learning Plan?
In 1998 the Federal Budget contained a new education funding plan called the Lifelong Learning Plan (LLP), which allows people tax-free withdrawals from an RRSP to finance post secondary education and skills training, either for themselves or their spouse, under certain conditions.
How the LLP works
Withdrawal limit: Individuals can withdraw a maximum of $10,000 in a single year from their RRSPs. More than one withdrawal may be made in a given year from any number of RRSP accounts, provided that the annual limit is not exceeded.
RRSP owner: Either the student using the funds, or a spouse must be the owner of the RRSP.
Full-time program only: LLP withdrawals must be used to finance full-time education or training of at least three month’s duration.
Disabled student: A disabled student, who is entitled to the federal disability tax credit, can qualify as a student under the LLP, whether or not he or she is studying on a full-time basis.
Repayment rules: LLP withdrawals must be repaid over a 10-year period, without interest, in equal or greater amounts – and can be repaid in less than 10 years if so desired. The repayment must be made no later than 60 days after the fifth year of the first withdrawal. Amounts not repaid must be included in the RRSP holder’s taxable income in that year.
Participation frequency: There is no limit on the number of times an individual may participate in the LLP. However, an individual may not participate in a new LLP before the end of the year in which all repayments from any previous participation have been made.
Canadian residents only: Recipients under the plan must be Canadian residents. Amounts outstanding under the LLP will generally be included in income for the year if the recipient dies or becomes a non-resident of Canada.
RRSP deduction: No deduction will be allowed for an RRSP contribution made less than 90 days before its withdrawal under the LLP. Due to this, any existing pre-authorized contribution plans should be suspended until after the LLP withdrawal.
Who can benefit from the LLP?
- A student who has had summer jobs for several years, and contributed annually to an RRSP (or whose parents have contributed on behalf of the child.)
- A child who works in a family business and has contributed to an RRSP
- A person who has been in the workforce and is going back to school to enhance his or her career
- A person who has decided to change careers but requires more education to do so
This article was prepared by Mackenzie Financial Corporation for Andray Domise, Independent Financial Advisor, who is an Investment Professional with International Capital Management, Inc.
© 2009 Mackenzie Financial Corporation. All rights reserved.
Tags: Education Planning, Investments, RRSP
This entry was posted on Tuesday, November 3rd, 2009 at 1:55 pm and is filed under Education, Investments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
