Accessing RESP account

Spidey · #1 06-20-2019, 02:58 PM

Our kids are both starting university in the fall. I'll be going to the bank to get access to the RESP we set up for them and was just wondering what people have done in the past. I'm tempted to set up a TFSA and have them move the whole lump sum of the RESP into that. Currently the RESP is held in a conservative GIC and I think a TFSA would perform better and give us better access.

The bank person I spoke with on the phone was very coy and didn't give me a straight answer. She said, most people just draw the money as they need it - as if she was steering me away from setting up a TFSA (I would be setting up the TFSA at another bank with no fees).

Upon proof of university enrollment, is it within my rights to request the full RESP be moved into another account? I really don't want to have go to the bank every time we need to draw on it for tuition or books, etc.

To me a TFSA makes the most sense if it's doable, but if anyone else has advice I'm all ears...

sillyak · #2 06-20-2019, 03:36 PM

I doubt it but don't know for sure.

What would stop someone from registering for university, flunking out after one semester and now the governments 20% is gone into someone's TFSA?

HunterDave · #3 06-20-2019, 03:39 PM

If it's an RESP I don't think that you can do anything with it without providing official receipts from a secondary education facility. With my Daughter I had to go to the bank and provide them with official receipts (rubber stamped and signed) each time in order to get reimbursed. The government gave the bank the responsibility to ensure that the RESP funds are spent on what they are intended for. After years of tax reductions and the government providing additional funds to the RESP they can't just let you take the funds out and trust you to spend it on your kids education. You're going to have to be inconvenienced but you should be able to move the funds from GIC's to a savings account within the RESP.

riden · #4 06-20-2019, 04:10 PM

I’m with BMO.

I did all withdrawals by fax and either same day or next day a 15 min phone call (max) and it was done.

48 hours later, it’s in my bank account. Proof of enrolment today is super easy, your kid can print it for you in 5 min

Weedy1 · #5 06-20-2019, 04:13 PM

Read this:

http://www.rbcroyalbank.com/student-...-answered.html

Ronji · #6 06-20-2019, 06:47 PM

I did an RESP for both of my kids. It was ridiculously easy. Just called up my rep at the time. He would ask how much we needed, and it was in my account in 2 days. Did not have to provide any documentation, or where the funds were allocated. We were told it could go to tuition, dorm fees, books, it did not matter.
Keep in mind this was 8 years ago, and the rules may of changed. We were with Investors Group at the time.

sdimedru · #7 06-20-2019, 07:19 PM

Quote:

Originally Posted by Ronji

I did an RESP for both of my kids. It was ridiculously easy. Just called up my rep at the time. He would ask how much we needed, and it was in my account in 2 days. Did not have to provide any documentation, or where the funds were allocated. We were told it could go to tuition, dorm fees, books, it did not matter.
Keep in mind this was 8 years ago, and the rules may of changed. We were with Investors Group at the time.

This sounds fantastic, but also like someone wasn’t doing their job... lol

bobtodrick · #8 06-20-2019, 08:02 PM

Just went through this last week.
You have to provide proof of enrolment in something (my kid was an auto apprenticeship). If you don’t all you get back is your principal. But as long as you provide proof you can take it all out and do whatever you want with it.

KGB · #9 06-20-2019, 08:10 PM

Depends on the amount of money in the RESP account, you need to be aware that the fund that you are planning to withdraw WILL BE ADDED to your child annual income. So let’s say you have 50K withdrawn - the kid will pay tax on that amount. I would withdraw only the amount that the child needs to live on, you can invest the funds in the resp account into anything you want, just like the tfsa, no difference!

Spidey · #10 06-21-2019, 08:36 AM

Quote:

Originally Posted by KGB

Depends on the amount of money in the RESP account, you need to be aware that the fund that you are planning to withdraw WILL BE ADDED to your child annual income. So let’s say you have 50K withdrawn - the kid will pay tax on that amount. I would withdraw only the amount that the child needs to live on, you can invest the funds in the resp account into anything you want, just like the tfsa, no difference!

According to the link Weedy provided, the only taxable amount to the student is the grant and investment income dollars. The contribution dollars have already been taxed.

http://www.rbcroyalbank.com/student-...-answered.html

None-the-less, it's a good point to keep an eye the dollars that will be taxed and spread out those withdrawals over different tax years to the kids won't have to pay any unnecessary income tax.

Kingfisher8 · #11 06-21-2019, 09:00 PM

RESPs are designed to save money for Post Secondary. You DO need proof of enrollment to withdrawal out of the GOVERNMENT grant portion of the money. If maxed out (rare), a student can get $7200 of the grant portion before touching the money mom and dad saved. Parents can take out the portion that THEY contributed at ANY time, but if the withdrawal is NOT for Post Secondary the government will take back their grant portion (20%). So if parents take out $1000 without proof of enrollment then there goes $200 of government money. Moving a RESP to a TFSA doesn't make sense because then you will lose the entire grant portion. If your money is in a RESP GIC then move it to a RESP mutual fund. You can invest in anything with an RESP. Just like you can invest in anything with a RRSP or TFSA. There are no fees for any of these accounts at any bank to HAVE the account. Changing banks doesn't make a huge difference, but changing who you deal with might. There is NO tax on RESP income. It will NOT go on you or your child's income tax. The money you put in when you were saving is already taxed. You worked and got paid and the money in your account is already taxed. Then you put that money into a RESP. You didn't receive a tax break when you put it in so you cannot be taxed when you take it out. You can be taxed on the income it makes. So $10000 making 4% is $400 of income taxed at the rate of interest income which is (I don't know) 15%, so the parent paid $72 to make $400 that year.
People mistake this with RRSPs because those you DO have to pay tax on when you take them out, but it is all fair because when you put money into the RRSP you received your tax BACK!

Spidey · #12 06-22-2019, 08:25 AM

Quote:

Originally Posted by Kingfisher8

RESPs are designed to save money for Post Secondary. You DO need proof of enrollment to withdrawal out of the GOVERNMENT grant portion of the money. If maxed out (rare), a student can get $7200 of the grant portion before touching the money mom and dad saved. Parents can take out the portion that THEY contributed at ANY time, but if the withdrawal is NOT for Post Secondary the government will take back their grant portion (20%). So if parents take out $1000 without proof of enrollment then there goes $200 of government money. Moving a RESP to a TFSA doesn't make sense because then you will lose the entire grant portion. If your money is in a RESP GIC then move it to a RESP mutual fund. You can invest in anything with an RESP. Just like you can invest in anything with a RRSP or TFSA. There are no fees for any of these accounts at any bank to HAVE the account. Changing banks doesn't make a huge difference, but changing who you deal with might. There is NO tax on RESP income. It will NOT go on you or your child's income tax. The money you put in when you were saving is already taxed. You worked and got paid and the money in your account is already taxed. Then you put that money into a RESP. You didn't receive a tax break when you put it in so you cannot be taxed when you take it out. You can be taxed on the income it makes. So $10000 making 4% is $400 of income taxed at the rate of interest income which is (I don't know) 15%, so the parent paid $72 to make $400 that year.
People mistake this with RRSPs because those you DO have to pay tax on when you take them out, but it is all fair because when you put money into the RRSP you received your tax BACK!

Thanks for the clarification - that's very helpful. The bank did say to spend the grant dollars first which lines up with what you are saying (eg. if they don't finish school for whatever reason, at least the grant dollars would be utilized). Once the grant dollars are all spent, can we then move the rest out into a TFSA without penalty? We'd like to set up a TFSA for each of our kids.

Kingfisher8 · #13 06-22-2019, 06:53 PM

Yes you could move it to a TFSA after that but they can only open a TFSA in their name when they are age of majority. Also, their limits would be low. It was $6000 in 2019. So that would depend on how much. You could hold it in your own name provided you have not maxed out your limit either. The further benefit of a RESP is that the parent(s) own it and kids are beneficiaries. I don't see a major benefit to moving it. Saved money in any plan is better than no saved money!