An education can be expensive — here’s how your RESP can help

In a few short weeks, your child or grandchild may be heading off to university or college for the first time. An education can be expensive — and that RESP you started so many years ago is about to pay off.

In a few short weeks, your child or grandchild may be heading off to university or college for the first time.

Of course you’re anxious about how successfully they will take this next big step in their life — but you are not anxious about how you will pay for it because you’ve long planned for this day by regularly contributing to a Registered Education Savings Plan (RESP).

Now it’s time to start putting that accumulated cash to work — and with the right withdrawal strategies, you can minimize the taxes your student will pay and get the full benefits of the Educational Assistance Payments (EAPs) that consist of the Canadian Education Savings Grant (CESG), the Canadian Learning Bond (CLB) and the income earned on the money you saved in the RESP.

Here’s how …

• Withdraw income before withdrawing contributions.

As the subscriber to your student’s plan, you can elect to withdraw the income as an EAP in the hands of your student — and that’s the tax-wise choice because your student’s income is likely to be very low.

• Avoid withdrawing contributions before your student begins school. Otherwise, you will trigger a repayment of the CESG.

• Spread out the EAPs over the expected length of the educational program instead of taking an all-at-once lump sum.

This avoids burdening your student with a huge taxable income in the first year and takes advantage of his or her (presumably) lower marginal tax rates over a number of years.

• Make the right withdrawals to avoid clawbacks.

You may be required to refund some of the CESG grant money if there are any earnings remaining in your RESP plan after your student completes (or leaves) his or her post-secondary program. To avoid a potential CESG clawback, use up your RESP earnings first.

• Be sure you’ll have the money when you need it. Before releasing an EAP, your RESP carrier will require proof of enrolment — so get that documentation to your carrier as early as possible.

• Take advantage of leftovers.

If there are still contributions remaining in the plan after your student finishes college or university, you can use that money as you wish. Transfer it to another child’s plan or withdraw it for your personal use.

An education can be expensive — and that RESP you started so many years ago is about to pay off. A professional adviser can help you make more of those good decisions that will achieve financial stability for you family and a debt-free education for your children or grandchildren.

J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.


Just Posted

Charles Hawkswell, Commander, of the Cape Lazo Power and Sail Squadron, presents a $1,000 cheque to the Comox Valley Marine Rescue Society. File photo
Comox removing moorage fees, hydro for Comox Valley Marine Rescue Society

Last year, the unit and society responded to more than 50 rescue missions in the past year

A Saanich man received almost 10 years in Supreme Court in Courtenay for a shooting incident from 2018. Record file photo
Shooting incident north of Courtenay nets almost 10-year sentence

Richard Daniel Vigneault was arrested without incident and faced 16 counts

Danielle Egilson has been awarded a $40,000 post-secondary scholarship with The Cmolik Foundation. Photo supplied
Student from Courtenay’s Vanier Secondary lands prestigious scholarship

Cmolik Foundation provides opportunities for youth who’ve experienced adversity

Poverty is a sad reality for some people in the Comox Valley. Photo by Jon Tyson on Unsplash
Project takes a hard look at poverty in the Comox Valley

Objective is to reduce poverty in the Comox Valley by 25 per cent over four years

Dr. Aref Tabarsi, a general pathologist at the North Island Hospital Campbell River Hospital Medical Laboratory, spoke about the issue of service in the region at a meeting in February 2020. Black Press file photo
Comox Strathcona hospital board wants pathology service back

Board supports move for chair, vice-chair to engage with Island Health on issue

Daily confirmed COVID-19 cases reported to B.C. public health, seven-day rolling average in white, to May 12, 2021. (B.C. Centre for Disease Control)
B.C. preparing ‘Restart 2.0’ from COVID-19 as June approaches

Daily infections fall below 500 Friday, down to 387 in hospital

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

The following is a list of restaurants offering take-out and patio dining. ADOBE STOCK IMAGE
List of Comox Valley restaurants offering take-out, patio dining options

Restaurants in the Comox Valley continue to adapt to government-imposed restrictions in… Continue reading

The only access to 5th Street bridge heading east (toward Lewis Park) is via Anderton Avenue. Photo by Terry Farrell.
Single lane alternating traffic controls on Courtenay bridge now in effect

Single lane alternating traffic on the 5th Street Bridge is now in… Continue reading

Chilliwack’s Kile Brown, performing as drag queen Hailey Adler, dances and lip syncs in front of hundreds of people during the inaugural Chilliwack Pride Barbecue at the Neighbourhood Learning Centre on Aug. 24, 2019. Monday, May 17 is International Day Against Homophobia, Transphobia and Biphobia. (Jenna Hauck/ Chilliwack Progress file)
Unofficial holidays: Here’s what people are celebrating for the week of May 16 to 22

International Day Against Homophobia, Talk Like Yoda Day, Sea Monkey Day all coming up this week

Sinikka Gay Elliott was reported missing on Salt Spring Island on Wednesday, May 12. (Courtesty Salt Spring RCMP)
MISSING: Salt Spring RCMP find woman’s car, still seek Island resident

Sinikka Gay Elliott is 5’3” with a slim build and dark brown short hair

Tagen Marshall of Parksville is looking to raise funds for a new specialized van. (Submitted photo)
Wolf: Parksville’s Tagen Marshall inspires others, aims to invest in himself

VIU honour student with spastic quadriplegia cerebral palsy seeks help achieving big dreams

Bradley Priestap in an undated photo provided to the media some time in 2012 by the London Police Service.
Serial sex-offender acquitted of duct tape possession in B.C. provincial court

Ontario sex offender on long-term supervision order was found with one of many ‘rape kit’ items

Most Read