Advertisement
You can either transfer the money to another registered account or withdraw and pay tax on it.
Q: What can be done with RESP money that is left over after a student graduates?
—Lynda Pappas, Mt. Pleasant, Ont.
A: A student with money left over? That seems as unlikely as a student with time left over during exam week or beer left over after a keg party. But if it happens, what can be done? If the government grant and investment earnings have already been used up, the capital that remains can be withdrawn. Lenore Davis, a financial planner and senior partner at Dixon, Davis & Co., says if there are still investment earnings left, “this may be transferred to an RRSP owned by the RESP plan owner, if that person has RRSP room.” Or the grant money and earnings can be withdrawn and taxed in the student’s hands up to six months after the child has left school. “After that point, the contributor will have to pay tax on the earnings and grants will be returned,” says Ron Graham, a financial planner and accountant. “The contributor will also have to pay a penalty tax of 20% of the investment income.” It’s best to withdraw the money while the student is in school, or, if there are siblings, you may be able to add them as beneficiaries so they can use the money (to throw a really awesome keg party).
Bruce Sellery is a speaker and author of The Moolala Guide to Rockin’ Your RRSP. Do you have your own personal finance question? Write to us at [email protected]
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
The Trump effect and Trumponomics, Shopify’s huge earnings beat, it’s sunny days for Suncor shareholders and more.
Here’s how to get your free ticket to attend two MoneyShow virtual expos.
You started investing in your 20s, and you feel pretty good about doing it. But now what? Consider impact...
The U.S. election made the market go up—for now. Is volatility keeping you up at night? Here are some...
Apple and Nvidia vie for global market cap crown; Google, Microsoft and Meta crush earnings; Amazon’s Bezos takes WaPo...
The Bank of Canada’s jumbo rate cut, Canadian railway earnings stay on track, Rogers disappoints, and Tesla surges on...
U.S. banks post solid earnings, Walgreens cuts costs, United Airlines is flying high, Netflix still dominates streaming, and Canada’s...
Some strategies are time-sensitive, while others can help you start the new year on the right foot.
Investors like Canadian Natural Resources’ latest purchase, Nvidia moves past Microsoft, Couche-Tard ups bid for 7-Eleven’s parent and Delta...
What happens if the student wants to take one year off school after graduating then resume in a masters programme. Does the 6 months limit before taxes hit still apply?
Thanks for the question. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.