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Registered Disability Savings Plan (RDSP)

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Registered Disability Savings Plan (RDSP)

What is a Registered Disability Savings Plan (RDSP)?

The RDSP is a government registered plan that helps individuals with disabilities and their families or caregivers save for future medical and living expenses.

The RDSP was developed to help parents and caregivers save for a disabled person who is eligible for the disability tax credit (DTC). The DTC is available to anyone with a qualifying disability as certified by an accredited medical practitioner. Learn about the DTC and find out if you qualify.

Contributions may qualify for grants through two financial programs offered by the Canadian government; the Canada Disability Savings Grant and the Canada Disability Savings Bond.

Like other types of registered plans, the money in an RDSP grows on a tax-deferred basis, meaning, it is tax sheltered until the recipient starts making withdrawals.

Benefits of an RDSP

  • Contributions may qualify for two Government grant programs: The Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB)

  • No annual contribution limit; only a lifetime contribution limit of $200,000

  • Any unused eligible grants or bonds can be carried forward from the original date of DTC eligibility

  • Anyone can contribute on behalf of the beneficiary with permission from the planholder

  • Unused funds from an RESP can be rolled into an RDSP, as long as the beneficiaries are the same

  • Tax-deferred savings

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How it works

The RDSP Plan holder

Individuals with disabilities can open their own RDSP, provided they have reached the age of majority. RDSPs can also be opened by:

  • A legal parent, guardian, tutor, or curator for the beneficiary
  • An individual who is legally authorized to act on behalf of the beneficiary
  • An organization legally authorized to act on behalf of the beneficiary

The beneficiary

To qualify for an RDSP, the beneficiary must:

  • Have a valid Social Insurance Number
  • Be eligible for the Disability Tax Credit (DTC)
  • Be a Canadian Resident when the plan is started and when all contributions are made
  • Be under the age of 60 (except when transferring in an existing RDSP)

Contributions and withdrawals

Anyone can contribute to an RDSP with the written permission of the plan holder. The plan holder doesn’t have to be a resident of Canada, but the beneficiary must be. Contributions can be made up until the year that the beneficiary turns 59, but the government will only match contributions up to age 49.

There is no annual contribution limit, but there is a lifetime contribution maximum of $200,000. Contributions are not tax deductible, but earnings will grow on a tax-deferred basis.

Contributions withdrawn from an RDSP are not included in the beneficiary’s income for tax purposes, however, government grants, bonds, and investment income earned within the plan are taxable on withdrawal.

Worth noting, if a withdrawal is made within 10 years of the last government match payment, the grant/bond portion would be clawed back based on the amount of the withdrawal.

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Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc.