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Old 08-06-2018, 08:40 PM   #4
Slava
Franchise Player
 
Join Date: Dec 2006
Location: Calgary, Alberta
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Actually, that’s a good point and I should have covered that! In terms of taxation you’re right that it’s only the growth and not your contributions. The same occurs if you shut the plan down without the child going to school, where you’re taxed on the gains. There are a few considerations though.

First, the government grants are gone, and you get your contributions back with out tax. He investment growth can be taken as well if the beneficiaries are over age 21 and not in school, the plan has existed for over ten years and you’re a Canadian resident.

The major drawback here is that a straight withdrawal you pay your regular tax rate plus 20% though, so clearly taking this is a last resort if you are looking at tax! There are other options. The transfer to the RRSP, transfer to another sibling are mentioned above. Another is to donate the holdings (we’re just talking about the investment growth here). This wouldn’t incur tax and at the same time might get you some savings depending on where you donate. In a lot of cases though, the best idea is to wait and see. The plan can remain open and the funds can be used at a later date, and a lot of things happen to young adults that might change their mind!
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