What Happens To An RESP If Your Child Doesn’t Go To School?

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by Enoch Omololu

Updated

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What happens to your kid’s Registered Education Savings Plan (RESP) if they decide not to pursue post-secondary education? It’s a good question to ask!

As I have previously discussed, the RESP is a great way to save money for your child’s higher education.

When you consider that the government through the Canada Education Savings Grant (CESG) also contributes up to a lifetime amount of $7,200 to your RESP, it is a WIN-WIN situation for you and your kid.

Apart from the CESG, families may qualify for additional government grants to enable them to save for their kid’s future education. These include the A-CESG, Canada Learning Bond, and other provincial educational grants.

Funds accumulated in an RESP can be used to pay for post-secondary education undertaken by your child after they graduate from high school – including apprenticeships and full or part-time programs offered by colleges, universities, trade schools, etc.

What If Your Child Doesn’t Go To College?

So, if your child decides they are not interested in further education, what are your options?

1. Keep the RESP open

There’s no rush! An RESP can stay open for 35 years after the year the account was initially opened. Your child may change their mind between 18 and 35, so you may want to wait and see.

2. Transfer the RESP to another Beneficiary

In a family RESP plan, you can just use the funds for another child named under the plan.

If the RESP was set up as an individual plan, you can transfer the plan to another beneficiary as long as they are under 21 years of age and a brother or sister of the original beneficiary.

If both conditions are not met, all or some of the grant money may have to be repaid to the government. Check with your RESP provider for more details.

3. Transfer the funds to your RRSP

You can transfer up to $50,000 from the RESP to your Retirement Plan (RRSP) tax-free if:

  • You have enough RRSP contribution room
  • The RESP account is at least 10 years old
  • The beneficiary is at least 21 years old and not pursuing post-secondary education
  • You are a Canadian resident

4. Close the RESP

You can always withdraw your direct contributions at any time tax-free.

However, all federal and provincial government grants must be returned as they can only be used to pay for post-secondary education.

Taxes and a 20% penalty are due on investment earnings.

5. Transfer the funds to an RDSP

Investment earnings from an RESP can be transferred to a Registered Disability Savings Plan if they share a common beneficiary. In this case, any government grants must be repaid.

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, Credit Canada, MSN Money, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

1 thought on “What Happens To An RESP If Your Child Doesn’t Go To School?”

  1. very helpful post!

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