Last week I read a good post about 8 Things You Need to Know about Withdrawing Money From your RESP Account but it really didn’t sink in until this week when I started trying to take money out of my kids’ RESPs (i.e. RESP withdrawals).
Last year (2009) I did my RESP withdrawals from my daughter’s RESP on-line and there was really no big issues, it all seemed to work just fine, however, evidently things changed because of abuse, but I am getting ahead of myself.
I checked my daughters’ RESPs and noted an interesting blurb at the bottom of the account info on line:
RESP withdrawals are not available through EasyWeb. For details about making an RESP withdrawals, please contact EasyLine at 1-866-222-3456.
That caused me to go back and read the blog entry again, and noted that the Government is now tightening down the methodology for removal of moneys from these savings accounts. Remember that an RESP is not like an RRSP in that you are putting After Tax money into the account, and there is no direct Tax savings to you for doing this. The RESP funds can earn Education Grants ( i.e. an EAP (Educational Assistance Payment) ) from the Government which is the major advantage to these accounts, and then when the money comes out the growth (and possibly the grants) are then Taxed in the hands of the Student (not the contributors), which is why I opened these accounts.
I dutifully called TD Canada Trust and was told that I could not take money out of my daughters’ accounts on line or even on the phone, until I went into a TD Canada Trust branch with a Verification of Enrollment form from my daughters’ schools (remember I have two daughters going to University this year). This means both Wilfrid Laurier and Acadia must send me one of these forms before my bank will release the funds for their education. I was told that this was due to abuse over the past few years by folks who had kids that didn’t actually attend any educational institution yet funds were removed from the RESPs, so now there is a need to prove your child is in an accredited program at a recognized post secondary institution.
Fudge! I exclaimed when I was told this, because this means I must pay for my kids expenses first and then wait to get the money to cover these large expenditures. In one case I can put the expenses on my Credit Card and get some PC Points, but the other school will not allow this, so I must outlay my own money and then get reimbursed.
Keep this one in mind folks, it’s not as easy as it was, to make RESP withdrawals, because a few knuckle heads decided to take advantage of the program.