What Happens to Unused RESP?

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Have you ever wanted to know what happens to unused RESP? The Registered Education Savings Plan (RESP) is one of the best things the government of Canada has ever introduced since you can get a yearly match up to $500 thanks to the Canadian Education Savings Grant (CESG). But you already knew that. What you’re likely concerned about is what happens if your child doesn’t use everything you saved.

The first thing you need to know is that there is no reason to freak out. Yes, there will be tax implications, but having too much money in your child’s RESP is a lot better than not enough. What you end up doing with that unused RESP depends on what options you have available to you so let’s take everything into consideration.

What Happens to Unused RESP?

RESP Withdrawal rules

If you didn’t know, your RESP can remain open for 36 years so you need to close it by the 35th year after opening the account. This is good because some children may not immediately pursue a post-secondary education immediately after high school or they may decide to pursue further education after they get their first diploma or degree.

Although your RESP is one lump sum, it’s actually made up of three different parts:

  • The principal (the money you’ve put in)
  • The CESG, Canada Learning Bond (CLB), and any provincial grants
  • Income e.g. interest, dividends and capital gains made on the above two parts

Eligible withdrawals from the principal are tax free which is why it’s sometimes referred to as a capital withdrawal. You don’t pay tax on this since you were already taxed on that amount before you deposited it into an RESP.

However, a non-capital withdrawal is taxable and depending on the situation, it might have to be repaid to the government. The taxable grants and income are taxed under the beneficiary but since they typically have a low income, they usually don’t pay much in tax at all. These types of withdrawals are known as Education Assistance Payments (EAPs)

Transfer the money

If you have more than one child, you can easily shift any unused money within the RESP to another beneficiary. You can also add siblings of the original grant recipient as a new beneficiary since government grants would still apply to them. Another option is to transfer the money to a niece or nephew where you wouldn’t pay taxes on the Accumulated Income Payment (AIP).

You also have the option to transfer any investment income made within the RESP up to $50,000 to your RRSP as long as you have the contribution room. This $50,000 sum can be split between both parents in any way. You don’t need worry as much about what happens to unused RESP when you have transfer options.

Collapse the RESP

Depending on the situation, it may make more sense to withdraw any unused RESP right away so you might as well get on with it.

Any unused government grant money such as the CESG, CLB and provincial grants must be repaid to the government. This seems unfair to some people, but that grant money was meant for the beneficiary’s post-secondary education. If they’re not continuing their studies, I think it’s pretty reasonable for the government to want their money back.

You’ll now be left with the Accumulated Income Payment portion of the RESP which is fully taxable. Not only will you be taxed at your marginal rate, but you’ll pay an additional 20%. If you’re in a high tax bracket, you could be pay paying 70%+ in tax which is insane.

Talk to a financial planner

If you’re not sure what happens to unused RESP, you could talk to a financial planner. Although having too much money in your child’s RESP is a good problem to have, you do want to have some kind of withdrawal plan in place so you can minimize taxes. Generally speaking, most people won’t run into serious tax issues unless the RESP has a lot of money left over and the parents have no RRSP contribution room left.

That said, remember, you can keep the RESP open up to 36 years. Even if you currently lack RRSP room, you could rebuild the room by not making any RRSP contributions for a few years. This requires a bit of timing and planning which is why you really do need to talk to a financial planner. 

Set up your RESP now

In case you haven’t set up your RESP yet and you’re simply reading about all the details, you’ll want to set one up for your child now. There are so many different ways you can set up an RESP with various companies but I personally prefer JustWealth since they have portfolios that will line up with your child’s education timeline.

Besides easy account maintenance, they’ll take care of the 20% match you get from the CESG so you can rest easy knowing that the money being put aside for your child’s education is being professionally managed. You can read my Justwealth review now for more details or use my Justwealth referral link and get $50 when you open an RESP with them.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. James Heidebrecht on January 15, 2020 at 11:34 AM

    I had no idea that you can keep your RESP account open up to 36 years. Thanks for the information. It’s such a great tool.

  2. Victor Nemov on July 22, 2020 at 6:36 AM

    Interesting enough you say in your RESP articles that you prefer Justwealth, but you hold your RESP investment with TD E-series funds.
    Can you comment why is that?

    • Barry.Choi on July 22, 2020 at 6:52 AM


      Justwealth is what I recommend to people who want a hands-off approach since they’re a robo-advisor. I find their RESP portfolio slightly better than other robo-advisors. Since I know a bit more about inviting that the average person, I use E-series funds as the MER is lower than robo-advisors.

  3. Eugen M on August 5, 2020 at 3:10 PM

    Hi there,

    Could you please advise how we can find out how much of the government contributions is left in an RESP account, at any point in time? Same question for the other two components that you have indicated (principal and gains)? We still have a large leftover amount past our son’s graduation.

    We have our RESP for our two kids (shared). Our daughter has graduated college and our son is about to start his last uni year. We really have to know where we stand, breakdown wise.
    The RESP is with HSBC and we have tried quite a few times to get this info and they say that it is impossible for them to get this data for us and that we should refer to the government.
    This makes absolutely no sense to us.

    All statements have been missing such breakdown, so we don’t know how much is left.
    We surely don’t want to have to return any of the government part.

    Lastly, we thought that the remaining amount was our kids’ to use, for any purpose they wish (minus any taxes or government returns, if applicable). Isn’t that the case?


    • Barry.Choi on August 5, 2020 at 7:59 PM

      Hi Eugene,

      I looked into this a little bit and all my sources say that your financial institution should have the breakdown. They all agree that the government website would not have the detailed breakdown you’re looking for. If the person you’re dealing with insists that you need to get it from the government, you may want to escalate things with them.

      • Eugen M on August 13, 2020 at 11:32 PM

        Hello Barry,

        Thank you for your response. I thought I would get a notification once you responded, which was not the case. Missed your response until now.
        Thanks for looking into this and confirming, I will surely escalate this, now that I have a confirmation that I was right all along. I guess it makes a lot of sense, after all.

        Much appreciated.

  4. Joseph Kim on August 14, 2020 at 11:20 AM

    Hello Barry,

    I have a question about withdrawal from RESP account. As there are 3 portions in the account, can I select which portion to be used first? For example, first I want to use up money from the government, and then income portion, and lastly principal I can take out without any taxes. So, I dont’ have to worry about the refund to government once I use all the grants.

    I appreciate your advice.

    • Barry.Choi on August 14, 2020 at 11:25 AM


      Jim Yih has a great post explaining your options when it comes to Withdrawals – https://retirehappy.ca/resp-withdrawal-rules/

      • Joseph Kim on August 14, 2020 at 11:49 AM

        Thank you for the great article! All parents should read it to study how to withdraw wise and smart.

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