The first article covered the BCTESG, the second the CESG, and the third where to open the account. All of that is about building it up.
This one is about taking it out. And for immigrant families, plans not going to plan is the more common case. A company calls you back to Korea. A child takes a route other than university.
Handle the RESP badly at that point and it is expensive. Know the rules and most of it resolves by simply waiting.
This article is for information and is not tax or financial advice. Confirm your own situation with a professional.
First: an RESP is not one pot of money
One principle runs through this entire article. The money in the account is three different kinds of money, and each has a different owner and different rules.
| Component | Owner | Tax on withdrawal | If it goes unused |
|---|---|---|---|
| Contributions (what you put in) | The subscriber (you) | None | You simply get it back |
| Grants (CESG, BCTESG, CLB) | The government | Taxed in the student’s hands | Returned to government |
| Growth (interest, dividends, gains) | — | Taxed in the student’s hands | Income tax plus an extra 20% |
Saying an RESP is or is not worth it as a single verdict gets you nowhere. Your own contributions come back tax-free under every scenario. What is at risk is the grants and the growth.
The normal path: two kinds of withdrawal
Once your child enrols at a university or college there are two ways to take money out.
A PSE contribution withdrawal takes only your own principal. It is not taxed, no T4A is issued, and no grant is repaid. You do not even report it on a return.
An EAP (Educational Assistance Payment) takes the grants and the growth. It becomes the student’s income, reported in box 042 of a T4A.
There is a planning point in that. An EAP is the student’s income, not the parent’s. Most students have little or no other income and have tuition credits on top, so the tax actually paid is often close to zero. Concentrate EAPs in years when the student has no income.
| EAP limits | Amount |
|---|---|
| Full-time, first 13 weeks | $8,000 |
| Part-time, per 13-week period | $4,000 |
| Annual threshold (2026) | $29,459 — above this, documentation is requested |
The first-13-weeks cap makes it hard to pull a large sum in the very first term. If first-term tuition is heavy, use a PSE withdrawal of principal instead — principal withdrawals do not count against the $8,000.
Case A: you are moving back to Korea
This is where the rules stop matching intuition.
The account stays open. There is nothing to close. The RESP survives your child becoming a non-resident.
New contributions and new grants stop. A contribution is only accepted while the beneficiary is resident in Canada with a SIN on file, so once your child is a non-resident you cannot contribute, and no further CESG accrues. One caution: if you keep contributing without realising you have moved, the CESG on those contributions is clawed back under a non-residency repayment. Cancel the automatic transfer as soon as the move is confirmed.
The BCTESG stays even after you leave BC
If the BCTESG has been paid into an RESP and the custodial parent or the legal guardian and the beneficiary leave British Columbia at a later date, the BCTESG remains in the RESP.
That is the ESDC operating guidance. The BC residency test applies only at the moment of application. The $1,200 you already received stays in the account whether you move to Alberta or back to Korea.
Which settles a question a lot of families ask: no, it is not worth delaying the application because you might move. Claim it.
Grants already received are not confiscated — they wait
The most misunderstood part. When an EAP is paid to a non-resident beneficiary, the components split like this.
| Component | Payable to a non-resident beneficiary? |
|---|---|
| Accumulated growth | Yes |
| BCTESG | Yes |
| CESG | No — must be resident |
| CLB | No — must be resident |
And the CESG that cannot be paid out is not repaid — it stays in the account:
The promoter should not repay this CESG amount. This CESG amount can remain until the beneficiary satisfies the required criteria to receive the CESG in an EAP, or the subscriber terminates the RESP.
So if your child later returns to Canada and enrols as a resident, it becomes available again. There is no reason to rush to wind the account up.
Studying abroad does not automatically make you a non-resident
Beneficiaries can study outside of Canada and still be considered by the CRA as residents of Canada.
Residency is determined case by case by the CRA, weighing family ties, where you live and your intentions. Even a child attending university in Korea may still be a Canadian resident depending on the circumstances, so do not decide this yourself — get it confirmed.
Withholding on EAPs paid to a non-resident
Payments from an RESP to a non-resident are, under section 212(1)(r) of the Income Tax Act, subject to 25% withholding in principle. Some countries may have a reduced treaty rate, but there is no settled published guidance on this point. The rate applicable to a Korean resident depends on interpretation of the Canada-Korea tax treaty, so confirm it with a tax professional.
Note also that if your child is enrolled at a Canadian institution and is determined to be a resident for tax purposes, the ordinary income tax system applies rather than this withholding. That determination cuts both ways, so settle it before you withdraw.
A checklist before you leave
- Finish that year’s contribution while still resident — put in $2,500 (or $5,000) to secure that year’s CESG
- If the BCTESG is unclaimed and your child is 6 to 8, apply before you go — residency is tested at application
- Cancel the automatic transfer after departure — contributions made as a non-resident trigger grant repayment
- Ask the institution whether it will maintain the account at a foreign address; some will not hold non-resident accounts
- Do not close the account in haste — closing it makes the grant repayment definitive
Case B: your child is not going on to post-secondary
The first answer is: wait
An RESP can stay open for 35 years from the year it was opened, and contributions are permitted for 31.
A child who did not enrol straight out of high school is no reason to wind anything up. Re-application, a gap year, military service, going back after working — starting college in your mid or late twenties is common here. Thirty-five years is a long time.
And the qualifying institutions are not only four-year universities. Colleges, trade schools and many apprenticeship programs count — including construction trades programs. Not going to university is not the same as not being able to use an RESP.
Second: change the beneficiary
If there is a younger sibling, you can substitute them. A family RESP makes moving between siblings simpler.
There are conditions. Either the new beneficiary is under 21 and a sibling of the former one, or both are under 21 and each is related by blood or adoption to an original subscriber. Note that the relationship tested is to the subscriber, not between the two children. A substitution outside those conditions triggers grant repayment, so confirm with the institution before making it.
One caution: adding a non-sibling beneficiary to a sibling-only RESP causes the BCTESG and the CLB to be repaid.
Third: an AIP
The last resort, when nothing else applies. The growth in the account is paid to the subscriber.
Conditions
- The subscriber is a resident of Canada
- The payment goes to only one subscriber
- It is after the year that includes the plan’s 9th anniversary, and every beneficiary is 21 or older and not eligible for an EAP
- (or the year of the 35th anniversary, or all beneficiaries have died)
- The RESP must be terminated by the end of February of the year after the first AIP is paid — an easy deadline to miss
Tax: the growth is taxed at your marginal rate plus an additional 20% (12% in Quebec). Contributions come back untaxed. The grants are returned to government in full.
Moving it to an RRSP avoids the extra 20%. You can transfer up to the lesser of your unused RRSP room and $50,000. That requires room to be available, so do not fill your RRSP with anything else in the year you plan to wind up the RESP.
Note: you cannot transfer directly to an FHSA. The CRA does not permit direct transfers from other registered accounts into an FHSA, and an RESP is included. Moving to an RRSP and then to an FHSA is possible but is a separate, two-step process.
What never to do: withdraw principal before enrolment
The most expensive mistake in this article. If a parent withdraws contributions while no beneficiary qualifies, all of the following happen at once.
1. The CESG is clawed back proportionally. The formula is A divided by B, times C — where A is the CESG balance immediately before the withdrawal, B is the assisted contribution balance, and C is the assisted contributions withdrawn. In practice about 20% of what you take out comes out of the grant.
2. Grant-assisted contributions come out first. The order is fixed: assisted contributions made from 1998 onward are withdrawn ahead of everything else. You cannot elect to take the unassisted money first.
3. The grant room is not restored. Repayment of the CESG does not restore the amount to the beneficiary’s grant room — repayments happen at the plan level, so nothing returns to the individual entitlement. The $50,000 lifetime contribution room is not restored either.
4. The Additional CESG is suspended for three years. Withdrawing assisted contributions makes every beneficiary in that RESP ineligible for the income-tested top-up for that year and the two following.
There are only two exceptions: correcting an over-contribution of $4,000 or less, or a beneficiary who qualifies for an EAP.
The conclusion: if you need cash, look anywhere but the RESP. A TFSA has none of these penalties and the room comes back the following year.
What to do, by situation
| Situation | Best order |
|---|---|
| Child enrols | PSE (principal) for the first term, then concentrate EAPs in low-income years |
| Move to Korea confirmed | Finish the year’s contribution, claim the BCTESG, cancel the transfer, keep the account |
| Child not enrolling | Wait (up to 35 years), then substitute a sibling, then AIP last |
| AIP unavoidable | Clear RRSP room and transfer up to $50,000, tax only the remainder |
| You need cash | Leave the RESP alone. Use other money first |
Four common misreadings
Leave BC and you have to give back the $1,200. No. BC residency is tested at application, and grants already received stay in the account.
Go back to Korea and the grants all disappear. No. New payments stop, but CESG already received is not repaid — it waits, and becomes usable if the child regains resident status.
If the child does not go to university, you lose. Your contributions come back tax-free under every scenario. What you lose is the grants, and — if you use an AIP — the extra 20% on the growth. And you have 35 years.
If money is tight, just take out the principal. The most expensive misreading of the four. About 20% of the grant leaves with it, the room disappears permanently, and the Additional CESG is suspended for three years.
To close the series
- BCTESG $1,200 — money with no contribution required, closing the day before the 9th birthday
- CESG $7,200 — $2,500 or $5,000 a year, with the year they turn 15 as the last checkpoint
- Choosing the account — grant support first; the fee gap outgrows the grant over eighteen years
- The exit — contributions, grants and growth are handled separately, and most problems resolve by waiting
The mistake immigrant families make most often is waiting until there is money to spare. But the deadlines in this system are set by the child’s age, not by your income. Age 9, the year they turn 15, age 17. The window closes while you are waiting for things to ease up.
There is one thing to check today: your child’s birthday, and when the window that is currently open will shut.