R-E-S-P Find out what it means to you

You started an RESP for your child’s future post-secondary education – but now they’ve decided they’re not going to continue in school, or to go to school at all.

If an RESP is not used for its intended purpose, there can be substantial tax implications. Before you cash it out, be sure your child will not change their mind!

But if you must clear out the account, know that:

  • Penalties may apply
  • Any government grant money must be returned, and any returns or interest on that money will be taxed as income + an additional 20% tax
  • If you transfer the funds to a sibling, any grants in excess of the CESG lifetime limit of $7,200 per child must be returned to the government
  • If you or your spouse have room in your RRSPs, you can transfer any returns/interest earned there to avoid the 20% penalty


For more details, see http://www.ctvnews.ca/5things/school-s-out-forever-how-to-avoid-resp-penalties-if-your-child-quits-university-1.3540452#_gus&_gucid=&_gup=twitter&_gsc=oM03Zlf, accessed November 28, 2017