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
You can withdraw contributions at any time. But if withdrawn for non-educational purposes, grant money will be returned to the government.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, you 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 you have RRSP contribution room—and if the RESP meets the AIP requirements, above – you can transfer the remainder of the 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 most recent Notice of Assessment
Tip:
Rolling the growth from the RESP to your RRSP isn’t free, but it is the most tax-efficient way to remove the growth from the RESP if the beneficiary decides not to pursue post-secondary education. If you roll the growth into your RRSP you’ll receive two tax receipts, A T4 RESP receipt along with an RRSP contribution receipt. Sign-up for secure client access and we will notify you when the receipts are available.
Add or Replace a Beneficiary
In an individual plan, there is an opportunity to replace the beneficiary. In a family plan, there may be an opportunity to add a beneficiary. However, both of these options could result in an over-contribution and loss of incentives. If you are considering doing this, please review with your advisor or call us to discuss the implications prior to submitting a request.