4 Rules to consider before opening an RESP
Written by Marcy Ages | Vice President & Certified Professional Consultant on Aging | September 22, 2015
Now that the new school year has begun, I am once again receiving my usual requests from clients to withdraw funds from their RESPs to pay for their children’s university tuition. There are many rules when it comes to opening an RESP, including who can open one, who can be a beneficiary and whether or not they are eligible for the different government grants. These rules affect when and how you can use that money, so it’s important to understand them fully.
•Limits on withdrawals
Most people assume that as soon as they need it, they’ll be able to take out as much money as they want from their RESP. If they want to take out their original contributions to the plan, they can do so at any time. However, most RESPs consist of contributions, government grants and investment income.
If you are going to take out any of the government grants or investment income, the first withdrawal is limited to a maximum of $5,000 for an individual who is enrolled in a full-time post secondary institution. You then have to wait another 13 consecutive weeks to withdraw more funds from the income portion. But if a student ends up taking a break from school for more than 12 months, the $5,000 limit will be applied again when the next withdrawal is made.Read more »