It's mid-summer, but I'm already thinking about back-to-school expenses.
Unfortunately, the days of duo-tangs and geometry sets are over. My wife and I will have two sons in university, one in residence and one living off-campus. Both schools our boys are attending are already asking for money. We have many weeks to pay, but that's not a lot of time when you're using registered education savings plans. If you're planning to withdraw money from an RESP for your kids' post-secondary education costs, start the process now.
First off, you'll need a proof of enrolment form. The university my younger son will start attending in the fall produced one of these within a day or so of making a request online. An electronic version was e-mailed to my son, who forwarded it to me. My older son attends a school that is hopeless at producing a proof of enrolment form. It's a major chore and requires a lot of intervention.
Next, you need to fill out an RESP withdrawal form. I downloaded one from our financial firm's website and filled it out in less than five minutes. The key question is how you want to set up the withdrawal. One option is an educational assistance payment (EAP), which includes interest, dividends and other investment gains in the account plus Canada Education Savings Grant money. Until a student has completed 13 weeks in a qualifying educational program, there's a $5,000 limit on EAP withdrawals for full-time programs. After that, there's no limit.
The other kind of withdrawal from an RESP is a post-secondary education payment (PSE), which represents money you contributed to the RESP and is not subject to any limits. Taxes are the key consideration in deciding whether to withdraw your contributions from an RESP, or grant money and investment gains. PSE amounts aren't taxable, while EAP is taxable in the hands of the student beneficiary. If you expect your child will have a substantial amount of taxable income for the year, you may want to lean more on PSE than EAP. Your financial firm keeps track of how much you've contributed to an RESP, how much investment income you've made and how much grant money you've received. Ask for a tally to help you manage your withdrawals.
One more consideration in filling out the RESP withdrawal form is where you want the money to go. You can have it sent to your chequing account, or your child's account. I have the money go into the joint account my wife and I have, and then pay tuition and residence bills via Interac online.
Your final task in making an RESP withdrawal is to get the forms to your financial firm. Ask your financial firm if it has a secure delivery system for delivering the documents electronically. If not you can mail them or drop them at a branch or office. I've had the actual transfer done is as little as two days and as long as a couple of weeks.