The right way to unwind an RESP

Do:

1. Allow enough time for your bank to process the withdrawal request. “It can be several weeks before you receive the funds,” says fee-for-service advisor Janet Gray.

2. Ensure you have the Proof of Admission letter from the educational institution. You’ll need it to submit with your RESP* withdrawal request.

3. Ask your advisor for the costs before you withdraw. Be aware that there could be fees on withdrawals from the RESP if they are held in mutual funds.

4. Withdraw the grant and income portion of the RESP first. It’s payable and taxable to the student whose income will likely be low while in college or university.

Compare the Best Savings Accounts in Canada* >

Don’t:

1. Forget that the contribution portion of the RESP withdrawal can be paid to you (the subscriber) or the student. The grant and income portions can only be paid to the student.

2. Withdraw more than $7,200 of grant money per beneficiary. Your financial institution keeps track of how much grant money is paid out to each beneficiary, so all you have to do is ask them for an update if you haven’t been keeping track yourself.

Updated Aug. 13, 2018

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