Winnipeg Free Press - PRINT EDITION

A little lesson on taking cash from RESPs

  • Print

Today's column is about the complicated business of withdrawing money from registered education savings plans.

While many parents will have completed this task for the current term, I have found in recent conversations many do not really understand what they did or why.

Still others have delayed the withdrawal decision because they have been unable to grasp the whole concept.

If you are in that category, do not feel bad. There is an entire book available called How to Withdraw Money from Your RESP Account Whether Your Child Goes to School or Not, by Mike Holman.

If this subject warrants a whole book, expect to find it a little complicated. My goal today is to try to make it simple.

The RESP is an account that allows you (parent, grandparent or friend) to make deposits (your capital), collect a 20 per cent government grant on each qualifying deposit and then invest the money.

The annual limit to the grant is $500, so a deposit of $2,500 makes the most sense. The maximum contribution that will attract a grant is $5,000 per year, but this only applies if you have grant room carried forward.

The maximum lifetime grant total is $7,200.

There is no tax deduction for the deposit. The incentives to use an RESP are the grant (Canadian education savings grant or CESG) and the fact the investment earnings are not taxed until withdrawal.

On withdrawal, your original capital is withdrawn tax-free. However, the grant and any investment growth are both taxable to the student and will be documented on a T4A slip issued at the end of the year.

The idea is students have tuition and education credits available to reduce or eliminate tax, and most of them are not earning a lot. (Sorry, parents.)

So, let's say your child is 18 and started post-secondary education this year.

Before you can submit a withdrawal application to the financial institution holding the RESP, you must obtain a certified proof-of-enrolment form from the educational institution. This is different than a tuition receipt and must be requested.

Here's another area of confusion. You do NOT need to provide proof of educational expenses to the RESP carrier, or in any way account for how the money is spent.

The only stipulation is enrolment in a qualifying post-secondary institution, although an interesting twist is the student cannot be receiving regular full-time employment income at the time of withdrawal.

In most cases, the best strategy is to specify to the financial institution you wish to withdraw the grant and growth first as an EAP (educational assistance payment). These are the taxable withdrawals. Based on course length and other factors, there are withdrawal limits in the first year.

Then you needn't worry about any future tax liability from withdrawals, even if the student beneficiaries of the plan all quit school.

By the way, we usually recommend a family RESP plan to our clients, as this combines all the children as beneficiaries on the same plan. Then, there is a greater chance of qualifying withdrawals by any of the kids who carry on in school.

If none of the student beneficiaries of the plan ever attends post-secondary education in the allowable 21 year lifespan of an RESP, then the grant must be repaid to the government on withdrawal, and the growth is taxable to the contributor. Alternatively, if the contributor has unused RRSP room, the growth can be transferred tax-free to the RRSP of that person.

Full RESP rules and regulations are available on the CRA and Service Canada websites, and most financial institutions do a good job of explaining these.

Keep in mind withdrawals could take weeks to process, based on the timing of requests.

Isn't it ironic so much education is required to understand the options of funding education?

Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

David Christianson, BA, CFP, R.F.P., TEP, is a financial planner and adviser with Christianson Wealth Advisors, a vice-president with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.

Republished from the Winnipeg Free Press print edition November 1, 2013 B17

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes


  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.


Make text: Larger | Smaller


Mia Rabson breaks down the federal budget

View more like this

Photo Store Gallery

  • A mother goose has chosen a rather busy spot to nest her eggs- in the parking lot of St Vital Centre on a boulevard. Countless cars buzz by and people have begun to bring it food.-Goose Challenge Day 06 - May 08, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • A goose heads for shade in the sunshine Friday afternoon at Woodsworth Park in Winnipeg - Day 26– June 22, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos


How do you feel about the federal budget?

View Results

Ads by Google