6 tips before withdrawing

from your RESP

Total Wealth Planning, Scotia Capital Inc.

One of the most effective ways for parents to save for their children’s education is to invest in a Registered Education Savings
Plan (RESP). Depending on whether they pursue post-secondary education, here are six tips to help you get the most out of
RESP withdrawals.

Scenario 1: When your child pursues 2. Education Assistance Payment (EAP)

post-secondary education The EAP is everything else and comprises of investment

Tip #1: Proof of enrollment
To withdraw funds from an RESP, you will need to provide
proof of enrollment for your child. This consists of a letter/
document on the educational institution’s letterhead,
containing the institution's name and address (including
postal code), date of issue (currently dated), student’s name
(and student number, if available), confirmation that they
are presently enrolled in the program at the institution, as
well as the enrollment status (full-time or part-time). If a
letter/document as described cannot be obtained, an
invoice from the educational institution may also be
accepted if all of the required information is included.
income, capital gains and government grants/bonds
earned in the RESP. The EAP is taxed to the student.
Again, with your child’s low income and available tax
credits, withdrawing EAP may help in reducing taxable
income.
Note: The maximum EAP withdrawal during the first 13
weeks of school is $5,000 ($2,500 for part-time
students). Thereafter, there is no limit up to the annual
EAP threshold. In 2021, the annual EAP threshold limit is
$24,676. Should more than the limit be required,
payments can be made from the PSE.
Tip #3: Time your withdrawals

Tip #2: Withdraw tax efficiently You want to withdraw EAP in the years when your child’s
income is low. Depending on summer jobs and co-op
A main benefit of an RESP is that it allows a portion of the
programs, their income may fluctuate year-to-year.
RESP withdrawal to be taxed in your child’s name. Typically,
Consider withdrawing more in low-income years to take
children have a low income and, coupled with tuition and
advantage of tax credits. Ultimately, you want to ensure the
education tax credits, they should pay little or no tax on the
entire RESP is withdrawn while they are in school, or
withdrawal. Let’s review the two portions of an RESP and
additional taxes may apply when the RESP is collapsed.
how they are taxed.

1. Post-Secondary Education Payments (PSE)
The PSE is simply your contributions to the RESP and
can be withdrawn tax-free. There is no limit to how
much can be withdrawn at a time.
Scenario 2: When your child does not
pursue post-secondary education
If your child does not attend post-secondary, the
government will retract all grants/bonds if the RESP is
collapsed. As previously mentioned, your contributions can
be withdrawn tax-free from the RESP. What remains will be
6 TIPS BEFORE WITHDRAWING FROM YOUR RESP 2

investment income, called the Accumulated Income sibling is under the age of 21. However, if the sibling already
Payment (AIP). received the maximum Canada Education Savings Grant
(CESG) of $7,200, the excess grant has to be returned to the
Tip #4: Move AIP to an RRSP government.
If you simply withdraw the AIP from your child’s RESP, it will Tip #6: Make use of the 6-month grace period
be taxed at your marginal tax rate plus 20% penalty. To
avoid this, you can transfer this amount tax-free into your There is a six-month grace period available after the
RRSP or your spouse’s RRSP up to your available beneficiary ceases to be enrolled in a post-secondary
contribution room, with a maximum limit of $50,000. If you education program. During this time, beneficiaries can
do not have enough RRSP room, you can postpone the withdraw excess RESP savings in the form of EAP. There are
transfer to the following year. some limitations and you might be audited by the Canada
Revenue Agency (CRA) if you make exceptionally large EAPs
Tip #5: Transfer to another RESP – the penalties could be severe
If you have multiple children with RESPs, you can transfer
the full RESP amount to a sibling’s RESP as long as the

For more information on RESPs and withdrawal strategies, speak with your Scotia Wealth Management
relationship manager.

® Registered trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management® consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment
Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of Scotia Capital
Inc. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

This publication has been prepared by Scotia Capital Inc. and is intended as a general source of information only and should not be considered or relied upon as personal and/or specific financial, tax, pension, legal or investment advice. We are not tax or legal advisors and
individuals should consult with their own tax and legal advisors before taking any action based upon the information contained in this publication. Opinions contained in this publication are our own as of the date hereof and are subject to change without notice. While care
and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither Scotia Capital Inc. nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of such material and
disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication
may not be reproduced in whole or in part without the prior express consent of Scotia Capital Inc.

Copyright 2021 Scotia Capital Inc. All rights reserved.