RESP question

[arcticcat522]

So, I opened a resp for my kids at Scotiabank and am now thinking about closing all of my Scotiabank accounts (except LOC) when they where set up, all the paperwork to get the government matching was taken care of. If I close/move the resp assets into a self directed investment account, will I need to redo the government paperwork, or will it follow the funds/childs name?

[ExtraSlow]

There's some kind of rule about the government grant portions not being permitted in self-directed accounts. Look into that before you do anything.

[suntan]

No there isn’t.

And yes the receiving brokerage is supposed to do the paperwork so that the govt knows where to drop the funds.

[Masked Bandit]

I can't speak to the self-directed portion but a while back I moved our RESP account from one institution to another and they took care of all the paperwork, I didn't need to deal with any of it.

[arcticcat522]

Thanks everyone

[ExtraSlow]

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No there isn’t..

Was there ever? Am I just hallucinating?

[arcticcat522]

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Was there ever? Am I just hallucinating?

I think they won't allow you to purchase some investments with the government portion.... But not positive

[tonytiger55]

Don't close it. Just do a transfer. There will be a small fee.
It would be a transfer out or transfer in. RESP to RESP.
The gov portion of the funds will have to be in GIC's more or less. Your potion of the funds can be in anything.

[suntan]

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The gov portion of the funds will have to be in GIC's more or less. Your potion of the funds can be in anything.

What? No, LOL.

You can invest in anything, but they have to be arm's length investments. So unless you're CEO of Vanguard you'll be okay.

[ExtraSlow]

Can someone knowledgeable please settle this? Are there restrictions on the types in investments you can buy with the government grant portion of an RESP?

I had a quick google and couldn't find anything definitive. But I swear that was a factor when I set up the RESP for my kids.

[suntan]

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Can someone knowledgeable please settle this? Are there restrictions on the types in investments you can buy with the government grant portion of an RESP?

I had a quick google and couldn't find anything definitive. But I swear that was a factor when I set up the RESP for my kids.

Well I have a self-directed RESP and all the money is invested in index funds and MAW104 for the last 13 years. So if the government has a problem with it, they haven't said anything. And if there were restrictions, you know that it would be on a web site plain and clear. And then there would be a zillion firms offering to manage your money for outrageous rates to avoid "not being compliant!"

There's some edge cases when it comes to taking out the money where you have to account for the gov't portion differently, but that has nothing to do with what you can invest in.

https://www.theglobeandmail.com/glob...rticle4535015/

[The_Rural_Juror]

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Was there ever? Am I just hallucinating?

No restrictions as far as I am aware.

Like I said. Let me handle your alternative investments and alternative lifestyles.

OP. Let the receiving institution handle the work so you don't accidentally screw up. Ask them to refund the transfer fee as well.

[ExtraSlow]

Thanks @suntan for that link. It directly contradicts what I remember being told by RBC when I opened my account. That's frustrating.
Relevant quote:

Mike Holman, the author of The RESP Book and the Money Smarts blog, says it's important for parents to know that they can purchase investment products inside an RESP account. "Any investment product that is eligible for an RRSP is also eligible for an RESP account," he said, including GICs, mutual funds, ETFs, and individual stocks.

Makes me wonder if some banks have in-house guidelines for RESP money that steers people away from stocks and self-directed options?

[suntan]

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Thanks @suntan for that link. It directly contradicts what I remember being told by RBC when I opened my account. That's frustrating.
Relevant quote:


Makes me wonder if some banks have in-house guidelines for RESP money that steers people away from stocks and self-directed options?

Oh you bet they'll say anything to get that sweet, sweet commission.

[Cagare]

There is no restriction on what you invest in. The only time you need to worry about the gains is if you collapse the account without it going to the child. Otherwise you can self direct get the grants, and invest wherever you like.

[tonytiger55]

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What? No, LOL.

You can invest in anything, but they have to be arm's length investments. So unless you're CEO of Vanguard you'll be okay.

Interesting.

1. Are the Government portion of funds (EAP, Provincial Grants and Canada Learning Bond) mixed into the self directed fund with the candidates own contributions?

2. When the time comes to withdraw funds from the RESP to pay for the childs education. If the money is mixed together, how does one determine how much to withdraw from the EAP side vs subscribers own contributions?

[skandalouz_08]

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Interesting.

1. Are the Government portion of funds (EAP, Provincial Grants and Canada Learning Bond) mixed into the self directed fund with the candidates own contributions?


2. When the time comes to withdraw funds from the RESP to pay for the childs education. If the money is mixed together, how does one determine how much to withdraw from the EAP side vs subscribers own contributions?

1. They are all comingled together within the account. You don't actually see the difference between the government contributions and your contributions.

2. The dealer or company you deal with is responsible for the back end record keeping regarding your contributions (PSE) versus the government portion (EAP) including the gains on the amounts invested. You can call and ask for these numbers at any time if you want to know but it's normally not readily published anywhere.

[suntan]

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Interesting.

1. Are the Government portion of funds (EAP, Provincial Grants and Canada Learning Bond) mixed into the self directed fund with the candidates own contributions?

2. When the time comes to withdraw funds from the RESP to pay for the childs education. If the money is mixed together, how does one determine how much to withdraw from the EAP side vs subscribers own contributions?

1) Well of course it is, how the fuck am I supposed to buy a $600 GIC anyhow with the little bitties the gov't gives me? Money is fungible, so what the fuck is the difference between saying I have $1000 in cash that's the gov'ts versus saying 10% of the invested amount is the gov'ts?

Give it up, you don't know shit about the topic.

[sabad66]

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2. When the time comes to withdraw funds from the RESP to pay for the childs education. If the money is mixed together, how does one determine how much to withdraw from the EAP side vs subscribers own contributions?

Why would it matter if it’s going to be used for the child’s education?

The only time it matters is if your child doesn’t go to school and you have to pay back the grants only. You would get to keep all your invested money tax-free, but any investment income earned is yours to keep except you have to pay tax on it (as if you were investing in a non registered cash account)

[tonytiger55]

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1) Well of course it is, how the fuck am I supposed to buy a $600 GIC anyhow with the little bitties the gov't gives me? Money is fungible, so what the fuck is the difference between saying I have $1000 in cash that's the gov'ts versus saying 10% of the invested amount is the gov'ts?

Give it up, you don't know shit about the topic.

Thats kinda harsh.
Perhaps I can clarify my position.
The two point question I was posting was to gain a understanding as others had posted a different viewpoint which in turn my posting may be incorrect.
skandalouz was kind enough to reply.
The two institutions I have worked at operated on separating the two. There is a shit ton of paperwork when opening a RESP. Hence I am interested in understanding in how it differs in ones own investing account.

Why would it matter if it’s going to be used for the child’s education?

The only time it matters is if your child doesn’t go to school and you have to pay back the grants only. You would get to keep all your invested money tax-free, but any investment income earned is yours to keep except you have to pay tax on it (as if you were investing in a non registered cash account)

In a standard account, funds are taken from different parts. To give context. A few months back I spent a shit amount of time helping a client's child withdraw funds for her education and making sure the institution did not screw her over. The institution HQ even got these numbers wrong and I had to correct them, I am no means a expert.
hence my curiosity to understand if you can put the cash together. Then why the institutions are so focused on separating the two and making my old job hell?