Registered Disability Savings Plan
You should consider opening a Registered Disability Savings Plan (RDSP) if you have a long-term disability and are
- under age 60,
- a Canadian resident with a Social Insurance Number (SIN)
- eligible for the Disability Tax Credit (Disability Amount) and looking for a long-term savings plan.
RDSP at a glance
- The RDSP is a long-term savings plan to help Canadians with disabilities and their families save for the future.
- The "beneficiary” of the RDSP is the person who will receive the money in the future.
- Anyone can contribute to an RDSP if they get the written permission of the RDSP holder (the person or organization that opens and manages the RDSP).
- There is no annual contribution limit to the RDSP, but there is a lifetime contribution limit of $200,000.
- The deadline for contributions each year to an RDSP is December 31 of that year.
- To help you save, the Government pays a matching grant of up to $3,500, depending on the amount contributed and your family income.
- The Government also pays a bond of up to $1,000 a year into the RDSPs of low-income and modest-income Canadians.
- Grants and bonds are paid until the year the beneficiary turns 49.
- Earnings accumulate tax-free, until money is taken out of the RDSP.
- To encourage savings, grants and bonds must remain in the RDSP for at least 10 years.
- There is no impact on federal benefits, such as the Canada Child Tax Benefit, the Goods and Services Tax Credit, Old Age Security, and Employment Insurance.
- In all provinces and territories, RDSPs will have little or no impact on social assistance payments (see RDSP and Provincial and Territorial Benefits).
- To open an RDSP and apply for the grant and bond, contact one of the participating Financial Organizations.
Eligibility and Contributions
Who can become a beneficiary of a registered disability savings plan?
Any individual can be designated as a beneficiary if he or she:
- is eligible for the disability amount;
- has a valid social insurance number (SIN);
- is a resident in Canada and at the time the plan is entered into;
- is under the age of 60. This age limit is not applicable when a beneficiary’s RDSP is opened as a result of a transfer from the beneficiary’s prior RDSP.
Note: A person is eligible for the disability amount only if a qualified practitioner certifies on Form T2201, Disability Tax Credit Certificate, that the individual has a severe and prolonged impairment. The form must also be approved by CRA and certified as being eligible for the disability amount.
Who can contribute to the registered disability savings plan?
Anyone can contribute to an RDSP with the written permission of the plan holder. For more information on who is qualified to become a holder please refer to “Who can set up a registered disability savings plan”.
Note: The holder does not have to be a resident of Canada. However, the beneficiary must be a resident of Canada when the plan is opened and when each contribution is made to the plan. RDSP payments can only be made to the beneficiary (or to the beneficiary’s estate after the beneficiary’s death). Contributors will not be entitled to a refund of their contributions.
When are payments made?
Only certain payments can be made from an RDSP:
- payments to the beneficiary referred to as disability assistance payments (DAP);
- payment to the beneficiary's estate following the death of the beneficiary;
- repayments of grants and bonds to the government; and
- the transfer of all property from the beneficiary’s current RDSP to a new RDSP of the beneficiary.
The RDSP issuer may allow the RDSP holder to request disability assistance payments (DAP) to be made to a beneficiary that are separate from lifetime disability assistance payments (LDAP). Contact a participating financial institution to determine if they offer plans that allow an RDSP holder to request these types of payments from a plan.
Disability assistance payments (DAP) are payments that the beneficiary of a plan can request even if they are not a holder of the plan. If the beneficiary reaches any age from 28 to 58, inclusive, during the year, they will have the right to direct that DAPs be paid to them in that year, provided that the total amount of all government contributions in the plan at the beginning of the calendar year exceeds the total amount of all private contributions in the plan at the beginning of the calendar year.
The total amount of these and all other payments that can be paid to the beneficiary in the calendar year is capped by a maximum lifetime disability assistance payment formula. The formula is calculated as follows: A ÷ (B + 3 - C) + D = the amount of the lifetime disability assistance payment.
A = the fair market value (FMV) of the property held in the plan at the beginning of the year,
B = the greater of 80 or the age of the beneficiary at the beginning of the year,
C = the actual age of the beneficiary at the beginning of the year, and
D = the total of all periodic payments paid, or deemed to have been paid, to the plan trust in the calendar year
Lifetime disability assistance payments (LDAP) are disability assistance payments that, once they are started, must be paid at least annually until either the plan is terminated or the beneficiary has died. These payments must begin by the end of the year in which the beneficiary turns 60 years of age and will be subject to an annual maximum withdrawal limit based on the beneficiary's life expectancy and the FMV of the plan. Only the beneficiary or the beneficiary’s legal representative (on his behalf) will be permitted to receive payments from the RDSP.
Registered disability savings plan contribution limits
There is no annual limit on amounts that can be contributed to an RDSP of a particular beneficiary in a given year. However, the overall lifetime limit for a particular beneficiary is $200,000. Contributions are permitted until the end of the year in which the beneficiary turns 59 years of age.
Note: Amounts directly transferred from a beneficiary's RDSP to another RDSP for the same beneficiary are not included in calculating the $200,000 overall contribution limit.
A specified year is the year in which a qualified medical practitioner certifies in writing that the beneficiary will not live longer than five years. A specified year will also include each of the five calendar years following the year of certification. A year will not qualify as a specified year unless the medical certificate has been provided to the issuer in or before the year in question. There will then be no maximum limits on the amount of disability assistance payments that can be made to the beneficiary in a specified year.
A transfer from one RDSP to another may only be conducted under the following conditions:
- the transfer must be made from a beneficiary’s RDSP to another RDSP for the same beneficiary;
- a transfer may only be completed if all holders of the current RDSP agree to the transfer; and
- all funds must be transferred from the current RDSP to the new RDSP.
If the transfer to the new RDSP is not completed within 120 days from the date the new RDSP contract is signed, the new RDSP will be considered invalid and the prior RDSP will continue as the ongoing plan.
Canada disability savings grants and Canada disability savings bonds
What are Canada disability savings grants (CDSGs)?
A CDSG is an amount that the government of Canada contributes to an RDSP. The government will pay matching grants of 300, 200, or 100 percent, depending on the beneficiary’s family income and the amount contributed. An RDSP can receive a maximum of $3,500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime. A grant can be paid into an RDSP on contributions made to the beneficiary’s RDSP until December 31 of the year the beneficiary turns 49 years old.
The amount of the CDSG is based on the beneficiary’s family income:
What are Canada disability savings bonds (CDSBs)?
A CDSB is an amount paid by the government of Canada directly into an RDSP. The government will pay income-tested bonds of up to $1,000 a year to low-income Canadians with disabilities, regardless of the amount contributed. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49 years old.
The amount the CDSB is based on the beneficiary’s family income:
When are repayments of Canada disability savings grants and Canada disability savings bonds required?
If any of the following trigger events occur, all government grants and bonds paid into the plan during the preceding ten years before the event must be repaid to the Government of Canada.
These trigger events are:
- the RDSP is terminated (voluntary closure);
- the plan is deregistered;
- a payment is made from the plan;
- the beneficiary ceases to be eligible for the disability amount; or
- the beneficiary dies.
For more information about the grant and bond, visit the Human Resources and Skills Development Canada website.
Who can set up a registered disability savings plan?
If the beneficiary has reached the age of majority and is contractually competent, only the beneficiary can open an RDSP and become a holder of the plan. If the beneficiary is a minor, another person can open an RDSP for the minor and become a holder if that person is:
- a legal parent of the beneficiary;
- guardian, tutor, or curator of the beneficiary, or an individual who is legally authorized to act for the beneficiary; or
- a public department, agency, or institution that is legally authorized to act for the beneficiary.
When a plan is opened by a beneficiary’s legal parent(s), the legal parent(s) may continue as holder(s) of the plan after the beneficiary reaches the age of majority. When the beneficiary becomes an adult and is legally eligible to enter into a contract, the beneficiary may be added to the RDSP as a joint holder if he or she so wishes. In all other cases, the beneficiary is the only one qualified to be a holder of the plan once he or she has reached the age of majority and is contractually competent. If a plan is opened by somebody other than the beneficiary or the beneficiary’s legal parent(s), that person or body must be removed as a holder of the plan when the beneficiary reaches the age of majority.
Similarly, an individual who is eligible to be a beneficiary of an RDSP (but for whom a plan has not been established) may have reached the age of majority but not be competent to enter into a contract. If so, another person may open an RDSP for the beneficiary and become a holder.
These qualified persons are:
- a guardian, tutor, or curator of the beneficiary, or an individual who is legally authorized to act for the beneficiary; or
- a public department, agency, or institution that is legally authorized to act for the beneficiary.
A legal parent may open a plan for a beneficiary who has reached the age of majority and is not contractually competent only when the plan is opened as a result of a transfer from another RDSP under which the parent is named as a holder. Also, a legal parent of a beneficiary, who has reached the age of majority and is not contractually competent, can open a plan for the beneficiary provided the legal parent is legally authorized to act on behalf of the beneficiary. A holder who is not the beneficiary of the plan does not have to be a resident of Canada but must have a valid Social Insurance Number or Business Number (for public institutions, departments and agencies) in order to establish the plan.
If the guardian, tutor, public department, or any other qualified individual or body is no longer qualified to be a holder (for example the beneficiary’s guardian ceases to be their legal guardian or has died) they must be removed from the plan as holder. In such a case, the following may be added to the plan as successor or assignees of a holder:
- the beneficiary;
- the beneficiary’s estate;
- any other person or body who is already a holder (for example, two legal parents enter into an RDSP contract together and one parent passes away, the other parent would receive the deceased parent’s rights and become the sole holder of the plan);
- any other person or body who is qualified to be a holder; or
- a legal parent of the beneficiary who had previously been a holder of the plan.
How do you establish a registered disability savings plan?
To establish an RDSP, a person who is qualified to be a holder of the plan must contact a participating financial institution that offers the RDSP.
Note: A beneficiary can have only one RDSP at any given time, although this RDSP may have several plan holders throughout its existence, and it can have more than one plan holder at any given time. The plan holder(s) is the person who establishes the RDSP and makes or authorizes contributions on behalf of the beneficiary.