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RDSP FAQs
Click on a question below for detailed information.
What is a Registered Disability Savings Plan (RDSP)?
The Registered Disability Savings Plan (RDSP) is a registered saving plan that is intended to help parents and others save for the long-term financial security of persons with severe or prolonged disabilities who are eligible for the Disability Tax Credit.
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Who can open a RDSP?
When Beneficiary is a Minor (under age 18 in most provinces)
- The legal parents or a guardian and agency legally authorized to act for the minor beneficiary may set up a plan and remain holders of the plan when the beneficiary becomes an adult.
- The beneficiary may become a co-holder of the plan upon turning 18 years of age.
When Beneficiary is an Adult (18 or older in most provinces)
- If a beneficiary is legally competent to manage property, then he/she must be the holder of the plan.
- If a beneficiary is not legally competent to manage property, the holder of a plan must be the beneficiary’s legal representative or the Public Guardian and Trustee.
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Can there be more than one account holder under an RDSP?
Yes. The legal parents of the beneficiary can both be account holders under the plan. In addition, the parents and the beneficiary can also be joint holders under the plan once the beneficiary reaches age of majority.
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Does the account holder need to be a resident of Canada?
No. The account holder does not have to be a resident of Canada provided that the beneficiary was a resident of Canada when the plan was opened and when each contribution was made to the plan.
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Can the account holder of an RDSP be changed?
Yes. Over the lifetime of a plan, the account holder can change. For example, if the mother of the beneficiary establishes the plan and is the holder, after her death the beneficiary or the beneficiary's subsequent legal guardian can become the plan holder. If at any time the plan holder (other than a legal parent) ceases to be an eligible holder, they must be replaced with someone who is eligible to be a holder of the plan.
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Who can be named a beneficiary to an RDSP?
An individual who is a Canadian resident, with a Social Insurance Number, under 60 years of age and Disability Tax Credit eligible.
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Can I name more than one beneficiary in the RDSP?
No, only one beneficiary per plan is permitted..
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Can I have more than one RDSP per beneficiary?
No, only one RDSP per beneficiary is permitted.
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Who can contribute to an RDSP?
Anyone can make a contribution to a RDSP, provided that the contributor has the written consent of the account holder.
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How much can I contribute to an RDSP?
You may contribute up to $200,000 per beneficiary during the lifetime of the RDSP. There is no annual contribution limit.
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How long can I contribute to an RDSP?
Contributions can be made to a plan until the earliest of:
- December 31st the year in which the beneficiary reaches 59 years of age;
- the time when contributions to the plan total $200,000;
- the time when the beneficiary no longer qualifies for the DTC;
- the beneficiary is no longer resident in Canada for tax purposes; and
- the beneficiary's death.
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Are contributions tax-deductable?
Contributions are not tax-deductable; however the earnings or income grow tax-deferred while held in the plan.
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Are there any Grants or Bonds in RDSPs?
Yes. To encourage long term savings through a RDSP, the Government of Canada created the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB).
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What types of withdrawals are permitted from an RDSP?
There are two types of withdrawals, known as payments:
- Lifetime Disability Assistance Payment (LDAP)
- Disability Assistance Payment (DAP)
On all RDSP payments, all Grants and Bonds received in the 10 years preceding the RDSP payment must be returned to the government. This is known as the Assistance Holdback Amount.
Lifetime Disability Assistance Payment (LDAP)
- LDAPs are recurring annual payments that, once started, must continue until either the death of the beneficiary or until the termination of the RDSP.
- LDAPs may begin at any age but must begin by the end of the year in which the beneficiary turns 60 years of age
- The maximum annual LDAP amount is limited by a legislative formula that considers life expectancy of the beneficiary and the fair market value of the plan.
- LDAPs are made up of a portion of contributions, income and Grants and Bonds.
- LDAPs can be used for disability and non-disability related expenses.
- Only the beneficiary can receive payments from the RDSP
- LDAPs are subject to the 10-Year Rule - All Grants and Bonds received in the 10 years preceding the LDAP must be returned to the government.
Disability Assistance Payment (DAP)
- DAPs are a lump sum payment made from the RDSP to the beneficiary or to the beneficiary’s estate
- The RDSP must retain enough assets to cover the government assistance holdback amount (the total amount of Grant and Bond received in the last ten years)
- DAPs may be requested by the beneficiary when they turn age 27 provided the total of government Grants and Bonds are greater than all account holder contributions at the beginning of the calendar year.
- DAPs are made up of a portion of contributions, income and Grants and Bonds.
- DAPs can be used for disability and non-disability related expenses.
- Only the beneficiary can receive payments from the RDSP.
- DAPs are subject to the 10-Year Rule - All Grants and Bonds received in the 10 years preceding the DAP must be returned to the government.
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Who pays the taxes on payments from an RDSP?
Withdrawals are payable only to the beneficiary and therefore taxed in the hands of the beneficiary or the beneficiary’s estate in the case of a beneficiary’s death.
Each dollar withdrawn from the plan is deemed to be comprised of three parts:
- account holder contributions
- income growth
- Grants and Bonds
The account holder contribution amounts are not taxable. The income growth, Grants and Bonds are taxable in the hands of the beneficiary.
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Do RDSPs impact other federal government programs?
No. RDSPs do not affect other income-tested federal government programs including: Old Age Security (OAS); Guaranteed Income Supplement (GIS); Canada Pension Plan (CPP); and the Goods and Services Tax Benefit (GST Benefit), to name a few.
In most provinces and territories, RSDP benefits do not impact existing provincial social assistance support programs. It is advised that you check with your province’s government offices to confirm RDSP benefit exemption in your area.
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Can a beneficiary lose their eligibility for a RDSP?
Yes, if beneficiary is no longer deemed eligible for the Disability Tax Credit. Upon loss of eligibility, the RDSP must be collapsed and all Grants and Bonds received in the 10 years preceding the beneficiary’s loss of DTC eligibility must be returned to the government.
The remaining proceeds of the plan – Grants and Bonds older than 10 years, income growth and account holder contributions - become an asset of the beneficiary. These proceeds are taxable in the hands of the beneficiary (net of account holder contributions).
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What happens should the beneficiary die?
Upon the death of the beneficiary, all Grants and Bonds received in the 10 years preceding the beneficiary’s death must be returned to the government.
The remaining proceeds of the plan – Grants and Bonds older than 10 years, income growth and account holder contributions - will pass to the beneficiary’s estate. The proceeds of the plan will be distributed according to the individual’s will. If the individual dies without a will, the funds will be distributed according to provincial estate laws.
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