RESP money: Whose is it?

RESP money: Whose is it?

An English major is refused her RESP money because her parents don’t like her choice of studies.

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Q: I’m a second-year university student and my parents think my English major is a waste of time. They’re now refusing to give me any more RESP money unless I switch disciplines. Is this legal?

—G.R., Victoria

A: We hate to be the bearer of bad news, but yes. “They own the money and can do whatever they want with it,” says Mike Holman, author of The RESP Book. Any funds don’t legally belong to you (the beneficiary) until your parents (the subscribers) pay it out. If you want the money, you’ll have to appease them. That, or hope they change their minds later. (But hopefully not too much later: your parents can keep the account open for 35 years, notes Holman.) Take some comfort in knowing that if they withdraw the RESP money without giving it to you, the 20% grant-matched funds go back to the government. Any money earned off the principal will also become taxable that year and will be subject to an additional 20% penalty. Ouch!

Got a delicate money question? Send it to ask@moneysense.ca.

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