— Educational assistance payments (EAPs), which are made up of grants received and plan returns since inception, are paid to your child. During the first 13 weeks of your child’s studies, the maximum EAP that can be paid is $5,000. After that, no limit is imposed.
— All of your plan contributions can be paid out to you. You can give this money to your child or use it for your own purposes. In both cases, these funds are paid out tax-free.
EAP amounts You choose the amount and frequency of payments for your child. The money is paid in the form of EAPs and can be spread over several years.
EAP money is taxable and is added to your child’s income. This is an advantage, because students often have a modest income and therefore pay little or no income tax.
With Diploma, you have access to your capital at all times. You can withdraw all or part of your contributions paid into the plan with no tax consequences.
However, if you withdraw contribution money before your child begins post-secondary studies, you must repay the government grants received on the money withdrawn.
The investment income, the education bonus and grant can be paid to the designated beneficiary when he/she begins a post-secondary education.
If your child doesn’t pursue post-secondary education, you can:
Designate a new beneficiary
Withdraw the money in the plan
Transfer the money to your RRSP
Make a donation
You may choose to designate a new beneficiary. New contributions may be made for the time remaining in the plan, as long as the original commitment is respected
However, to maintain the previous grants, the new beneficiary must meet one of the following conditions:
— The new beneficiary must be under 21 years of age
and be the brother or sister of the former beneficiary,
or
— Both beneficiaries (former and new) are related by
blood or adoption to the subscriber (The old and
the new beneficiary must be under 21 years of age)
| RESP contributions | RESP interest | Grants and bonus | |
|---|---|---|---|
| Withdraw the money in the plan | Your contributions can be recovered tax-free. | Certain conditions must be met to withdraw the interest generated in the RESP. This money is added to your annual taxable income and is subject to an additional income tax of 20%. You must close the RESP at latest by the end of February the year following the year of the first payment. | Grant money must be reimbursed to the respective governments and the education bonus will be returned to the Company. |
| Transfer the money to your RRSP | Your contributions and the interest generated in the RESP, up to $50,000, can be transferred to your or your spouse’s RRSP if: — You have unused RRSP contribution room |
||
| Make a donation | Your contributions can be recovered tax-free. | This money can be donated to the designated educational institution of your choice. | |