What To Do With An Unwanted RESP

Some of us opened an RESP for our child only to later realize they will not be attending post secondary education. It’s tempting to simply collapse the RESP but there is now a better option.

For the last couple of years an option to rollover some of the funds from an RESP to an RDSP has existed. To do this one of the following conditions must be met:

  • The individual has a severe and prolonged condition which will prevent him/her from attending post secondary education
  • The RESP itself must be at least 10 years old and the beneficiaries at least 21 years and not pursuing further education or
  • The RESP itself must have been in existence for 35 years

Once one of the above conditions has been met, the rollover will happen as follows:

  • The contributions will be returned to the subscriber (i.e. the parent) on a tax free basis
  • The savings bonds and grants will be returned to the government
  • The investment income will be transferred to the RDSP
  • The transfer will count toward the lifetime contribution limit of the RDSP
  • It will not attract a matching government grant
  • The funds will be taxable on withdrawal from the RDSP in the hands of the beneficiary

What does this mean for you?

  • If you have set up an RESP don’t panic as you are not going to lose your money
  • Don’t be in a rush to collapse the RESP as you may yet find a way to use the account.

2 thoughts on “What To Do With An Unwanted RESP”

  1. Hi Kelly

    My apologies. There is no direct relaxation of benefits for a disabled person. I have edited my post and removed the offending sentence.

    Having said that, there are ways that a person afflicted with autism can use the RESP. If their functioning level is appropriate, they may be able to audit the courses desired.

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