Useful Tips on Making an RESP Withdrawal

For years you have been saving up for your child’s education and when it’s finally time to use the money, how do you proceed? Before you proceed with the withdrawal, make sure you contact your financial institution for details. The rules might be a bit more restrictive in the case of scholarship or group RESPs. Here are some tips you could make use of when making an RESP withdrawal:

• Proof – When it comes to withdrawing funds from your RESP account, the proof of enrollment is more than enough to justify your payment request. However, make sure you get the specific criteria required by your financial institution. You can get a Verification of Enrolment form filled out by the educational institution. 

• Limit your withdrawal per beneficiary – In the case of family RESPs, make sure you limit the withdrawal per beneficiary to $7,200. This is the lifetime grant limit set for each beneficiary. Of course, you can set the amount yourself and it would be possible to withdraw more than this amount for one beneficiary.
  
  In this case, you will need to return the grants to the government. You can get a detailed account of the grant money given to each beneficiary from your financial institution. This will help you prevent withdrawal of inappropriate amounts.

• Go for more – Making withdrawals from your RESP account is not as simple as making withdrawals from your checking account. That’s why you might want to consider withdrawing more at once rather than small amounts. It’s not like you have to give all the money to your child as soon as making your withdrawal. You can keep it safe and pay them out on a regular basis.

• Withdraw accumulated income – It is highly recommended that you withdraw the accumulated income in your RESP account as Educational Assistance Payment or EAP. There are some cases where the accumulated amount is withdrawn as Accumulated Income Payment or AIP because the student drops out of school.
  
  In such instances, the grants have to be returned to the government. In addition, the withdrawn amount is considered taxable income and you will need to pay 20% as penalty tax as well.