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via ATB asked:

RESPs—what is the Accumulated Income Payment (AIP)?

An Accumulated Income Payment (AIP) allows the subscriber to withdraw earned income from an RESP—but it comes at a price.

When withdrawn, AIPs are taxable to the subscriber at the subscriber’s marginal tax rate, and an additional 20 per cent tax is also applied. Still, it might be the solution when a beneficiary doesn't attend school or finishes school without using all the earned income from an RESP.

The RESP account also has to meet at least one of the following criteria before you can withdraw those earned funds:

  • the RESP must be at least nine years old, and all beneficiaries must be at least 21 years old and finished school.
  • the RESP must be at least 35 years old, or if it was a specialized plan, 40 years old.
  • all listed beneficiaries must be deceased.

If the RESP meets one of these criteria, you can withdraw the AIP and pay extra at tax time. But you have another option—investing the AIP into a Registered Retirement Savings Plan (RRSP). Assuming you have RRSP contribution room, this is an alternative solution for RESP subscribers who are under the $50,000 lifetime AIP limit.

RESPs are a valuable education savings vehicle, but some of the rules are complicated. For help setting up or tapping into an RESP, speak with an ATB Investor Services advisor​.​​​​​

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