Using Your RESP | Mackenzie Investments

Using Your RESP

A Registered Education Savings Plan (RESP) is a smart long-term plan to support your child’s post-secondary education. Whether your child decides to pursue post-secondary education or not, an RESP can go a long way to support them in the future. Here’s what you need to know about each option:

If the beneficiary goes to school

There are two types of withdrawals that you can make. One is the Educational Assistance Payment (EAP) and the other is the Post-Secondary Education Capital Withdrawal (PSE).

Education Assistance Payment (EAP)

  • Made up of grant and earnings components
  • Full-Time Student Limit: $5,000 during 1st 13-week period
  • Part-Time Student Limit: $2,500 for each 13-week period of study
  • No limit on the earnings
  • A T4A tax receipt will be issued to the beneficiary
  • No tax implications to the subscriber(s)
Components (made up of) Withdrawal Limits Tax Implications
Grant + Earnings

Full Time Students: $5,000 during the 1st 13 week period.

Part Time Students: $2,500 for each 13 week period of study.

A T4A tax receipt will be issued to the beneficiary.

No tax implications to the subscriber(s).

Post-Secondary Education Capital Withdrawal (PSE)

  • Made up of contributions (Principal)
  • No withdrawal limit
  • No lifetime limit
  • No tax receipt issues on this portion
Components (made up of) Withdrawal Limits Tax Implications
Contributions (Principal) No Limit No tax receipt is issued on this portion.

What documents are required to make a withdrawal?

1) The Mackenzie RESP Withdrawal Form

  • All sections must be completed.
  • Full investment (withdrawal) instructions are required.
  • Subscriber(s) can indicate whether they would like to redeem from the EAP or PSE portions.
  • Withdrawal can be made payable to the beneficiary, subscriber(s) or the educational institution.
  • Payment options include Electronic Fund Transfer to beneficiary or subscriber(s) or cheque to beneficiary, subscriber(s) or educational institution.

2) Valid Proof of Enrollment

Enrollment can be for a current, upcoming or a term that has ended within 6 months. To avoid delays in processing your request, proof of enrollment documents must come from the educational institution and provide the following information:

  • Name of Student
  • Program Type
  • Term start date, duration and year of the program
  • Educational institution’s name (by logo, letterhead or website address)

Examples of potential proof of enrollment documents

The following documents can be obtained from your child’s post-secondary institution. The details of these documents may vary from institution to institution. Please contact the institution’s registrar office for more information.

  • Letter from the registrar
    • States beneficiary is enrolled in the current or upcoming term
    • Signed or certified by the office of the Registrar or department head
  • Invoices from the registrar’s office
    • Includes name of student, program type, start date/duration or school term and school name or logo or website address
    • Imply part- or full-time status (by course length, tuition cost or number of courses)
  • Verification of enrolment form
    • Includes name of student, ID, address, program and school information
    • Signed and stamped by designated official
  • Online confirmation of registration status
    • Includes name of student, program type, start date/duration and school name or logo or website address
    • Implies part- or full-time status (by course length, tuition cost or number of courses)
  • Personalized timetables or course schedules
    • Includes name of student, program type, start date/duration and school name or logo or website address
  • T2202 or T2202A receipt
    • Submitted within the first six months following the end of the beneficiary’s term of enrollment in a qualifying program
    • This completed form can typically be found on the institution’s Student Centre website

Additional Tips

    • An acceptance or admission letter or student card is not considered valid proof of enrollment; however, an acceptance letter along with other documentation confirming enrollment may be acceptable.
    • Timetables are easily accessible online and can be simply printed. This means your child does not need to contact the school to receive appropriate documentation.

If the beneficiary does not go to school

Wait

  • Your child may change his or her mind about going to school. RESP accounts can remain open for 36 years.

Choose a new beneficiary

  • In an individual plan, anyone can be the new beneficiary, but if the new beneficiary is not a sibling and under 21, the Canada Education Savings Grant (CESG) must be returned to Employment and Social Development Canada (ESDC).
  • In a family plan, the new beneficiary must be related by blood or adoption to the contributor. In this case, the CESG can be allocated to another beneficiary as long as the total CESG does not exceed $7,200. Otherwise, any excess grants must be returned to EDSC.

Roll over to an RRSP

  • You can defer the tax payable on the income withdrawal by rolling it directly into your RRSP or spousal RRSP, provided:
    • The RESP has been open for at least 10 years
    • All beneficiaries are at least 21 and not currently continuing their education after high school
    • You have contribution room
    • You are a Canadian resident
    • Rules of the plan allow it
  • The maximum rollover is $50,000 per contributor, so a husband and wife who are joint contributors to a family plan can each roll over up to $50,000 to their RRSPs.

Withdraw contributions

  • Contributions made to the plan can be withdrawn at any time on a tax-free basis; however, any grants paid on these contributions will be returned to the government.

Withdraw earnings and growth

  • In addition to the tax-free contributions that can be withdrawn from the RESP, you may also be entitled to withdraw the earnings and growth on the contributions plus the earnings and growth on the grants (the grants themselves are repaid to the government) if you meet certain conditions. This is known as an Accumulated Income Payment (AIP). You will qualify for an AIP if all current and previously named beneficiaries have reached the age of 21, are not attending a post-secondary institution and the RESP has been in existence for at least 10 years. An AIP is taxable at your marginal tax rate plus a 20% penalty tax.

Roll over to a Registered Disability Savings Plan (RDSP)

  • As of 2014, if the beneficiary becomes disabled, there is new legislation that will allow you to move the accumulated income to a qualified RDSP for the beneficiary. This can be done on a tax-deferred basis with no 20% penalty.

Note: If money from an RESP is withdrawn for reasons other than the beneficiary’s education, part of or all of the grant money must be returned to ESDC. This is referred to as “claw-back.”


Still have questions?

Speak to your financial advisor for more information about RESPs and investing with Mackenzie Investments.

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