5 RESP rules you should know

If this is your child’s first year at university, you may be trying to figure out how to tap all that money you saved in their RESPs.



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You’re going to have to pay tuition and residence costs long before the kids head back to the halls of higher learning. So it’s time for you to learn something new too.

Here are five things to keep in mind as you tap your RESPs:

1. I was surprised when I first learned that only $5,000 of non-contribution money can be withdrawn in the first 13 weeks your kid is in school. “Non-contribution” money is the income earned and the CESG payments you received from the government. There is no withdrawal limit on contributed money. You’ll need to provide proof of enrollment at a qualified school to get money out the first time. After that, you can take whatever you want to pay for books, rent, tuition, and the like.

2. Only the original contributions to the RESP can be withdrawn tax-free. Income earned and grant money is taxed in your child’s name.

3. Since you can direct your financial institution to withdraw contributions or earnings, withdraw as much of the earnings and grant money as you can — as soon as you can — leaving the contributions in the plan the longest in case your kid drops out!

4. If your first child does drop out or doesn’t use all the money saved, transfer the rest to a sibling. Since the life of an RESP is 36 years, younger siblings have plenty of time to use the money. No sib? Then you’ll have to collapse the account. There will be a penalty on the non-contribution money if you don’t transfer that money to an RRSP.

5. No beneficiary is allowed to receive more than $7,200 in grant money so watch those family accounts carefully. Miscalculate and the government will take the extra grants back.

4 comments on “5 RESP rules you should know

  1. What happens if I over-contributed in one year to one child, and didn't receive the grant for almost $700? Can I withdraw it and re-deposit it? Or, how do I get the grant?


    • Greg, you would think you should be able to transfer between accounts…ask your financial advisor or institution specialist who has your accounts. To guard against this problem going forward, combine the accounts into a "Family" RESP. All children are named on the account and you will qualify for the gov't benefits based on the total amount deposited (every $2,500 starts a new 20% pro rata gov't input up to $500 per child) and the money can be used by whichever child needs it (note the $7,200 max grant usage per child when they begin withdrawing, as mentioned above).


  2. No matter what you buy in the market, there are always rules stipulated for the goodness of the plan completion. It is very important for us as a consumer to ask reasonable questions when in doubts. Besides, look for some sales rep you can trust for the answers.
    Most important of all, make sure you come up with a plan which has enough savings with steady and secured growth over the years without worrying the depletion of money by the time when we need it most. RESP is a time savings plan not an investment!


  3. I filed the proof of enrollment forms during my first semester for my parents to withdraw all the money they contributed to the account. Right now we've had a falling out and they are refusing to support me at all financially. But isn't the money in my name? And do they even have the right to do that?


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