Ask the Expert… Can I make RESP withdrawals for non-educational purposes?

Depending on what your child decides to do after they finish secondary school, there may be situations where they won’t be pursuing a post-secondary education immediately—or at all. In this case, it’s important to weigh your options for what you can do with the RESP you’ve grown for them in the near and long-term.

RESP transfers

In a situation where your child doesn’t pursue post-secondary education or has a balance remaining in their RESP after graduation, there are a few options for you to make use of the funds in other ways—both for your children or for yourself:

1. Leaving the RESP open in case your child pursues further education at a later time (the account can remain open for up to 36 years if you opened it the year they were born); or,
2. Transferring the RESP to a different beneficiary (only applies to siblings), which can preserve grants and CLBs if the new beneficiary is under 12 years old.

Withdrawing contributions or investment growth

While you can withdraw your RESP contributions tax-free at any time or transfer up to $50,000 into you or your spouse’s Registered Retirement Savings Plan (RRSP), you must repay all grants, including federal and provincial grants and CLBs. You can withdraw any investment growth as Accumulated Income Payments (AIPs) from the RESP as long as:

1. The account is at least 10 years old;
2. The beneficiaries are at least 21 years old and not pursuing education; and,
3. You are a Canadian resident;

However, the tax implications in doing so are steep: AIPs are taxed at your regular rate plus an additional 20% penalty tax. Therefore, it is likely in your best interest to utilize RESP funds in one of the other ways listed above.

If you’re unsure of how to make the best use of an RESP, talk to your DMCL advisor and they’ll be happy to help you explore your options.