Wait, there are two types of money in there? I just found out that pulling funds from an RESP isn't just one simple "withdraw" button. It’s actually a choice between your money and the government's money!
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This is the "Post-Secondary Education" payment. Essentially, it’s the capital you personally contributed over the years. Since you already paid taxes on this money before putting it in, you can take it back tax-free! I didn't realize I could send this part to myself or the student without any tax hit.
The "Educational Assistance Payment" is where it gets tricky. This is the grant money and the investment growth. This money is taxable, but here is the twist: it's taxed in the student's hands! Since most students have low income, they often pay zero tax on it. Wow!
I was so confused at first! Why does it matter which one I pick? Well, turns out if your child drops out (hopefully not!), any remaining grant money in the EAP portion has to go back to the government. Oh no! That's why many people say to take the EAP (grant portion) out first while the student is enrolled.
It’s like a puzzle. You have to balance the CESG Grants and your own contributions. If you take too much EAP at once, the student might actually have to pay some tax. You have to keep an eye on those annual limits to make sure you aren't triggering weird rules.
Also, did you know there is a limit for the first 13 weeks of school? For full-time students, you can only take out a certain amount of EAP (around $8,000 as of my last check) during that initial period. After that, the gates open up! It's much more flexible than I imagined, but you definitely need a plan.
You can't just tell the bank "hey, my kid is in school." You need official documents! Most universities have a specific "Verification of Enrollment" form. I found out that a simple tuition invoice might not be enough for some providers.
Pro tip: Make sure the document shows the school's letterhead, the student's name, and whether they are full-time or part-time. If it's a Family Plan, make sure you specify which child is currently hitting the books!
Download the official enrollment letter from the student portal. Don't wait until the last minute!
I'm going with EAP first to use up those government grants. Remember the 13-week limit!
Fill out their specific withdrawal form. Some banks let you do it online, others need a real signature.