I feel like this is being vastly overthought, but I guess MMM is about optimization, and I'm just not understanding the logic.
I just put 175$ into each kids mutual funds (e-series funds), and the gov adds their 20%. When they withdrawal the earnings and the grant money it is taxed in their hands regardless of the source, therefore the vast majority comes out untaxed as it is after tax money.
Yes, but RESP money can come from anywhere - ie, it can be 'your' income going into it.
CTB money can earn outside the RESP and be taxed in the child's hands. IF you're going to max the grant from the RESP (CESG), and have spare money (which happens to be the CTB money), you can put the CTB money into a trust in the name of the child, and have them pay (no) tax on that money.
If you get $250 a month of CTB money, which happens to be 'spare', you can put $3k/year into this; over 15 years assuming the markets are somewhat kind, you can expect that $45k to turn into $90k, with an ACB of $90k, throwing off say $2.7k of dividends.
All in the child's hands. And separate from the RESP.