Toronto Star - - BUSINESS -

With­drawals from an RESP are called Ed­u­ca­tion As­sis­tance Pay­ments (EAPs). You can only with­draw up to $5,000 of ac­cu­mu­lated in­come in the first 13 weeks your child is en­rolled full-time in a post­sec­ondary in­sti­tu­tion. Af­ter 13 weeks, your child can dip into his or her RESP sav­ings, but those with­drawn funds are tax­able at his or her cur­rent net in­come. As a full-time stu­dent, that isn’t likely to re­sult in much of a tax bill, if at all. If your child doesn’t at­tend post­sec­ondary school, you have two choices for how to exit the RESP: you can close it al­to­gether, or you can roll the bal­ance into a reg­is­tered re­tire­ment sav­ings plan (RRSP), if you have the con­tri­bu­tion room. But be aware that the RESP will con­sist of two parts: con­tri­bu­tions are the money you de­posited into the plan. Ac­cu­mu­lated in­come is the por­tion of money you didn’t con­trib­ute. This in­cludes CESG, div­i­dends, cap­i­tal gains and in­ter­est pay­ments. “(Any­one) who opens an RESP may with­draw their con­tri­bu­tions for non-ed­u­ca­tional pur­poses at any time,” says David Birk­beck, se­nior di­rec­tor, reg­is­tered plans, RBC. “What you need to be aware of is that, if you do choose this op­tion, you’ll have to re­turn any gov­ern­ment grant and bond money re­ceived for your child.” Once you’ve paid back the grants, you will be taxed on any in­vest­ment gains at your cur­rent in­come level. If you roll that money into your RRSP, the in­vest­ment gains can also be trans­ferred tax free. Cer­tain stip­u­la­tions for rolling an RESP into an RRSP must be met, adds Birk­beck. “Your RESP must have been in ef­fect for at least 10 years.”

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