Registered Education Savings Plans (RESPs) are a powerful financial tool for Canadian families to save for their child’s future post-secondary education, and understanding how to transfer funds between children can make a world of difference when it comes to your savings.
Sometimes, life plans change. Whether it be a new sibling being born, a child deciding not to pursue post-secondary education, or another child needing more financial support than others. The good news is that transferring money between beneficiaries is possible.
In this guide, we’ll walk you through when transfers are allowed, the difference between individual and family RESPs, how government grants work, tax implications, and more.
If you have more than one child, stick around for more information.
When Can You Transfer an RESP Between Children?
Not all RESP accounts handle transfers the same way:
Family RESP Plans
Family RESPs are designed with flexibility in mind and are perfect for families with more than one beneficiary. If a child named in the plan decides not to go to school, the plan allows you to transfer RESP funds to another eligible sibling (blood or adopted). You’ll need documentation proving the relationship between the beneficiaries, and the transfer must happen within the rules of your RESP provider to ensure government grants remain intact.
Individual RESP Plans
Individual plans are more restrictive when it comes to transferring RESP funds between beneficiaries, because there is only one beneficiary per account. This means that if you want to change the beneficiary, you may have to close the account entirely before opening a new one, or transfer the funds to a sibling’s RESP if your provider allows. However, any grant money from the Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), or provincial grants may need to be repaid.
Family RESP vs. Individual RESP: Choosing the Best Plan For You
If you plan to have more than one child, choosing the right RESP plan from the start is essential. Let’s do a brief breakdown of the difference between family vs. individual RESPs.
Family Plans
These plans allow multiple siblings to share a single account, which makes beneficiary changes easier. You can transfer funds to younger siblings without losing grant money, as long as they have available CESG room and the age and relationship criteria are met. The pros and cons of family RESP plans include:
Pros:
- Easier RESP fund management.
- Consolidated investment earnings.
- Fewer accounts to watch over.
Cons:
- Lifetime contribution limits still apply per beneficiary, so careful management is essential to avoid penalties.
Individual Plans
Individual plans are a lot simpler if you only have one child or prefer to have separate accounts for each beneficiary. While it’s easier to track the RESP contribution room for each beneficiary, it does complicate transfers. If the original beneficiary isn’t using the funds, some providers allow funds to be transferred to a sibling, however, grants may not be fully transferable.
Which to Choose: If you’re looking for flexibility and have more than one child, a family plan is usually the better choice. If your child is an only child or you prefer separate funds, an individual plan is a suitable option.
What Happens to the Canada Education Savings Grant (CESG)& Canada Learning Bond (CBL) During Transfers?
Collecting government grants when contributing to a registered education savings plan (RESP) for your child’s education is one of the many benefits of these accounts. So, understanding how grants are affected is essential before deciding to transfer unused contributions:
- Canada Education Savings Grant: When transferring funds to another eligible sibling within a family plan, the CESG typically remains with the RESP contributions up to the $7,200 maximum.
- Canada Learning Bond: The CLB is not transferable because it is awarded per beneficiary.
- Provincial Grants: BCTESG or QUESI may have their own claw-back rules. Always check with your provider before moving funds to another beneficiary.
Limits & Tracking After a Transfer
After you transfer your RESP funds, tracking RESP contributions and grant room is essential to avoiding overcontributing to the RESP.
- Lifetime Contribution Limit: $50,000 limit per RESP beneficiary, across all plans.
- Annual Contribution Limit: The new beneficiary can continue to receive CESG up to $500 per year (with max $2,500 contributions). If there is unused contribution room from previous years, you can catch up by adding up to $5,000 per year to maximize federal government grants.
- Maintain Accurate Records: Keep a record of all provider statements. You can access your Embark statements through your online account.
To Avoid Penalties:
- Confirm the new beneficiary is eligible to receive funds and that they are enrolled in an eligible educational institution before you request educational assistance payments (EAPs).
- Avoid withdrawing funds for non-educational purposes, as it can trigger grant clawbacks.
- Keep all provider documentation confirming that the transfer is compliant with transfer rules organized and stored in a safe location, so you can access it if needed.
Step-by-Step: How to Transfer or Change Your RESP Beneficiary
To transfer or change your listed beneficiary, follow these steps:
1. Confirm Your Plan Type
First, confirm whether your RESP account is an individual or family plan. While family plans allow flexible transfer to eligible siblings, individual plans have stricter rules that may trigger grant clawbacks. Family plans may also be subject to clawbacks if the savings exceed grant maximums.
2. Verify Eligibility of the New Beneficiary
Ensure the new beneficiary is a sibling (for family plans) or that they meet eligibility rules (for individual plans). Once confirmed, gather birth certificates and social insurance numbers (SIN) to verify the relationship.
3. Check Grants and Contribution Room
Review all grants linked to the original and the receiving beneficiary. Confirm the lifetime contribution limit ($50,000 per child) won’t be exceeded when transferring funds.
4. Request Provider Forms
Contact your RESP provider to get the official transfer/change forms.
5. Submit Documents
Provide proof of the relationship between beneficiaries and double-check that all grant details are understood to avoid clawbacks.
6. Review Provider Confirmation
Once the request is processed, carefully review the confirmation to ensure the funds are allocated correctly.
7. Update Contribution Plan
Adjust any future contributions to the new child’s RESP and catch up on grant room and RESP contribution room if needed.
8. Keep Records
Keep all records of transfers for future RESP planning and possible CRA inquiries.
Example Cases & FAQs
As we said, life doesn’t always go according to plan. Unexpected changes like a child not pursuing post-secondary education, taking a break, adding a new sibling to the mix, or studying part-time can all affect how you handle your contributions, withdrawals, and grants. Let’s go through some common scenarios together:
Child’s Post-Secondary Education is Paused, Or They Don’t Attend
If the original beneficiary takes a gap year, switches programs or educational institutions, or decides not to pursue further education, you don’t have to close your RESP account. You can leave the funds in this account for up to 35 years until your child re-attends school, or you decide to transfer to a younger sibling in a family plan.
That way, you can maintain grant money and continue growing your investment earnings, without having to pay taxes until the money is withdrawn later on.
Adding a Newborn or Younger Sibling
Family plans are ideal if you anticipate having more than one child. You can add a newborn or younger sibling at any time, allowing contributions and grants to be shared. Just remember to keep track of each beneficiary’s RRSP contribution room to avoid over-contribution penalties.
Siblings Far Apart in Age
When beneficiaries within the plan are significantly different in age, planning withdrawals and grant utilization becomes even more important. Early contributions will likely only benefit older siblings, however, with the right plans in place and educational assistance payment (EAPs) withdrawals, you can ensure younger siblings still have access to investment earnings and grants.
Part-Time or International Studies
If the new beneficiary studies part-time, education assistance payments (EAPs) are capped at $4,000 every 13 consecutive weeks. For international studies, confirm the school qualifies as a Designated Learning Institution (DLI) to ensure grants remain eligible. Documentation requirements may differ, so check with your provider.
FAQs
Can CESG/CLB move with the transfer?
Yes, CESG can be transferred if within a family plan, but not CLB. Any grant amount exceeding the $7,200 entitlement for each beneficiary will be returned.
What if there’s no eligible sibling?
Consider leaving your RESP open or transferring your RESP to a Registered Retirement Savings Plan (RRSP) if you have RRSP contribution room for the year.
If you’re still unsure about he best option for you, reach out to your RESP provider for assistance.
Example Scenarios
Below are a few practical examples of how RESP transfers may look for different families:
Scenario 1: Moving Left-Over Funds to a Younger Sibling in a Family Plan
Jenna is finishing university with some RESP money left over in the Family RESP plan set up by her parents when she was born. Jenna’s younger sister Amy is about to begin post-secondary school, so their parents decide to reallocate the remaining funds to her.
And, because the RESP is a family plan and Amy has not reached her grant max, the transfer is straightforward: both contributions and CESG move directly into Amy’s account as she still has RESP contribution room left. CESG doesn’t need to be paid, because Amy and Jenna are blood-related.
Scenario 2: Switching an Individual Plan Beneficiary vs. Opening a New Plan
Deacon’s parents originally opened an Individual RESP for him. But after he decides not to pursue post-secondary education, the RESP money is at risk of going unused.
Since Deacon’s younger sister, Goldie, plans to continue her education after high school, their parents look into transferring the funds to support her instead. Because the original RESP is an individual plan, it must be formally updated to change the beneficiary from Deacon to Goldie.
When a beneficiary is replaced, the contributions and accumulated income (earnings on contributions and grants) can stay in the plan. However, the CESG (Canada Education Savings Grant) can only remain if Goldie is under 21 years old and meets the sibling relationship criteria. If she doesn’t qualify, those grants are repaid to the government—but the income earned on them can still be retained within the plan.
While some parents might consider closing the original RESP and opening a new one for the second child, that approach has drawbacks. Closing the RESP would mean losing the income earned on contributions and grants, and if the new beneficiary is over 17, they wouldn’t be eligible for new grants on future contributions.
In most cases, replacing the beneficiary on the existing plan is the better option—it allows the family to keep the accumulated income and, if eligible, retain the grants too.
Scenario 3: No Eligible Sibling is Available
Not all families have another child who qualifies for an RESP transfer.
Let’s say Liam’s parents opened an RESP for him, but he later decides not to pursue post-secondary education—and he’s an only child. In this case, there are still a few options for what his parents can do with the RESP funds.
They can:
- Withdraw their original contributions tax-free, since these were made with after-tax dollars.
- Transfer up to $50,000 of investment earnings from the RESP to their RRSP, if they have available RRSP contribution room.
- Take an Accumulated Income Payment (AIP), which allows them to withdraw the plan’s earnings—but this amount will be taxed at their marginal tax rate plus an additional 20% penalty tax.
It’s important to note that any grant money received must be repaid to the government, and these options are only available if the RESP has been open for at least 10 years and the beneficiary is at least 21 years old, with no plans to pursue post-secondary education.
The Bottom Line
Transferring an RESP to another child is an excellent way to keep education savings flexible and maximize government incentives. Family plans undoubtedly make this process easier, but individual plans work as well, as long as transfers are planned correctly.
Regardless of the method you choose, make sure to track your contribution room over the years, including grant eligibility and tax implications, to avoid penalties.
Are you ready to optimize your RESP transfer? Contact Embark today to explore the various options available to you. That way, you can make an informed decision that benefits your child’s education savings long term.
Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.
