Unused funds could remain in an RESP if the child doesn’t pursue or complete post-secondary education or if they graduate without needing all of the funds. If that’s the situation, you have several choices.
Support another child. If you have one or more other children under 21, the remaining funds can help cover their education costs, either through a family RESP or by transferring the funds to another child’s individual RESP.
Keep it open. You can keep an RESP open for 35 years after it was established, while investments grow tax-deferred—just in case the child decides to start or continue their education in the future.
Close the RESP. If you choose to close the plan, you must return any grant money to the government. You get back the value of your original contributions tax-free. When you receive the remainder, which is the plan’s earnings, the tax is considerable. It’s called an accumulated income payment and is taxed as regular income, then subject to a 20% penalty (12% for Quebec residents). However, you are allowed to transfer up to $50,000 of the accumulated income payment to your or your spouse’s Registered Retirement Savings Plan (RRSP). That defers the tax as regular income and avoids the penalty. You must either have contribution room available or create room by holding off on your RRSP contributions until you can make the transfer.
This material was prepared for and published on behalf of your financial advisor and is intended only for clients resident in the jurisdiction(s) where their representative is registered.
This material is provided solely for informational and educational purposes and is not to be construed as an offer or solicitation for the sale or purchase of any securities or as providing
individual investment, tax or legal advice. Consult your professional advisor(s) prior to acting on the basis of this material. Insurance products are available through advisors registered with
applicable insurance regulators. Individual equities are available only through representatives of Assante Capital Management Ltd. In considering any particular investment, please remember
that past performance is no guarantee of future performance. Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness.
All opinions expressed and data provided herein are subject to change without notice. Neither CI Assante Wealth Management or its dealer subsidiaries Assante Capital Management Ltd. and
Assante Financial Management Ltd., nor their affiliates or their respective officers, directors, employees or advisors are responsible in any way for any damages or losses of any kind whatsoever
in respect of the use of this material. CI Assante Wealth Management is a registered business name of Assante Wealth Management (Canada) Ltd. Assante Capital Management Ltd. is a member of
the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Assante Financial Management Ltd. is a member of the Mutual Fund Dealers Association
of Canada and the MFDA Investor Protection Corporation (excluding Quebec). © 2022 CI Assante Wealth Management. All rights reserved.