Question: If the beneficiary of an RESP is over 21 years of age and does not wish to pursue higher education and the contributor takes the funds back into income, what part is taxable?

Can these funds be transferred to the son’s RRSP?

Gordon Pape answer: When there are no potential beneficiaries who are going to be using the RESP funds as intended-to go to school-the earnings in the past were forfeited, usually to an educational institute.

However, since 1998, it has been possible to take the earnings into income-unfortunately with a 20% penalty however. This is computed on form T1172 and Line 418 of the tax return.

A second option is to transfer the amounts to the contributor’s RRSP-if there is room and age permits. This is not an option in this case.

Therefore you are left with taking the earnings into income with the penalty or forfeiting the earnings entirely to an educational institute, depending on the terms of your plan. Please contact your plan issuer to explore these options and deadlines for withdrawal, further. If you can defer taking the income to 2001, you may face lower tax rates.

Unfortunately, theunds cannot be transferred to the son’s (beneficiary’s) RRSP.

For more information, visit The Jacks Institute,, offering over 15 certificate tax courses by self-study, and other tax education resources including books by best-selling author, Evelyn Jacks. Or call for a free brochure 1-800-30-JACKS.

The answer given is for general information purposes only and should not be relied upon in the place of professional tax advice. The authors and publishers cannot be held responsible for any consequences that result from actions taken upon this information.