Investing for Post-Secondary Education

Non-Educational Withdrawals

There are several ways to withdraw from an RESP for non-educational purposes. Here’s a look at each type of withdrawal, including the conditions and consequences.

What if a beneficiary doesn’t attend school?

WITHDRAW THE CONTRIBUTIONS

Your clients can withdraw their contributions at any time. But if they withdraw for non-educational purposes, grant money will be returned to the government.

How to withdraw: Mail or fax us a completed RESP Withdrawal Form

WITHDRAW THE GROWTH

A non-educational withdrawal of growth is called an Accumulated Income Payment (AIP). This can only be done under the following conditions:

  • the plan has been registered for 10 years

    and

  • all beneficiaries in the plan are at least 21 years old

If the above conditions are met, the subscriber can withdraw the growth in cash (minus withholding taxes and penalties*).

*The government applies the following withholding tax rate to AIP cash withdrawals:

Withdrawal Amount% of Federal Tax Withheld
From $0 to $5,000 30% (41% in Québec)
From $5,001 to $15,000 40% (50% in Québec)
Greater than $15,000 50% (55% in Québec)

How to withdraw: Mail or fax us a completed RESP Withdrawal Form

TRANSFER TO AN RRSP

If the subscriber has RRSP contribution room—and if they meet the AIP requirements, above – they can transfer the remainder of their RESP to a retirement savings plan without withholding taxes or penalties.

How to transfer to an RRSP: Mail or fax us the following:

  • A completed T1171 Waiver
  • A copy of your client’s most recent Notice of Assessment

ADD OR REPLACE A BENEFICIARY

In a family plan, contributions, grant and growth can be used by another child. Your client can add another child to their family plan as long as the new beneficiary is 20 years old or younger. But beware: if the new beneficiary isn’t a sibling of the existing beneficiary, it may result in loss of additional grant and provincial incentives.

In an individual plan, a beneficiary can be replaced at any time. Here’s what to keep in mind to avoid over-contributions or a loss of grant:

  • The new beneficiary must be under 21 and a sibling of the beneficiary being replaced;

    or

  • Both beneficiaries (old and new) must be under 21 and related to the subscriber by blood or adoption.

How to add or replace a beneficiary: Mail or fax us the following:

  • Signature guaranteed letter of direction signed by the subscriber(s). Please include the following information about the new beneficiary:

    • Full name
    • SIN
    • Date of birth
    • Address
    • Relationship to the subscriber
    • Relationship to the existing beneficiaries (if being added to a family plan)
    • Relationship to the beneficiary they are replacing (in an individual plan)
  • Application for Basic and Additional CESG & CLB if the new beneficiary is under 18

Flyer

Investor Flyer – Client-friendly sales piece that explains the benefits of opening a Franklin Templeton RESP

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