Things that you need to know when you are ready to use your RESP funds

When it comes to maturity of your child’s RESP Plan, the following are key things that you need to know about of getting your RESP funds:

1. Proof of registration: When your child’s plan comes to maturity, you will need to provide proof of registration in order to show that your child turns 18 years of age and is expected to begin their post-secondary studies.

2. Who gets the money? Either the subscriber or the student (beneficiary) can receive the money. If you request a withdrawal of accumulated income in the form of an EAP (Educational Assistance Payment), the money has to be sent to the student.

3. Who can request the money? Only the subscriber can request payments. Students cannot request the payment on their own.

4. Taxes: EAPs are taxable income at student’s hands. Since students usually have no or little income, they only require paying little or no tax on their withdrawal of EAP.

5. Understand withdrawn money from contributions.
There are two parts of contributions in your RESP account:

  • Contributions: the money that you put toward to the RESP plan.
  • Non-contributions which is the accumulated income from government grants, interest or capital gains. There is a $5,000 limit for EAPs in the first 13 weeks of schooling.

You need to specify how much money you want to withdraw from your contributions and/or the EAPs.

6. Grant money withdrawal: You need to make sure you do not overdraw EAP at one time; there is a maximum of $7,200 lifetime grant limit per beneficiary from EAP.

7. What if the student quits post-secondary studies? Beneficiary drops out of a post-secondary program, and then the remaining EAP will be forfeited. The accumulated income in the RESP account will be withdrawn as an AIP (Accumulated Income Payment), and is taxable for the subscriber. The grants will also need to be returned to the government.