Section 4 – Health, Seniors and Caregivers
Registered Disability Savings Plan
The RDSP is generally comparable to the RESP (see Section III) and is intended to encourage saving for the long-term financial security of a person eligible for the disability tax credit. An RDSP may be set up by the disabled person, or if the person is a minor, one of his/her parents or his/her legal representative.22 Once it has been set up, anyone can contribute to it up to a lifetime maximum of $200,000 per beneficiary. There is no annual limit. Contributions may be made until the end of the year the beneficiary attains 59 years of age.
22 Under, a temporary measure expiring on December 31, 2023, a parent, spouse or common-law spouse may set up a plan for an adult whose ability to contract is in doubt.
Grant and Bonds Available
RDSP contributions are eligible for the CDSG, up to the following amounts:
|Maximum CDSG federal contribution
(cumulative maximum of $70,000 per beneficiary)
|Family income thresholds23||Up to $95,259||Greater than $95,259|
|300% of first $500 contributed||$1,500||—|
|200% of next $1,000 contributed||$2,000||—|
|100% of amount contributed||—||$1,000|
|Maximum total grant per year||$3,500||$1,000|
The CDSB is also available to individuals whose family net income is relatively low. The CDSB is paid into the RDSP of a beneficiary regardless of the amount contributed in the year, up to the following amounts:
|Maximum CDSB federal contribution
(cumulative maximum of $20,000 per beneficiary)
|Family income thresholds23||Up to $31,120||From $31,120 to $47,630||Greater than $47,630|
|Annual amount of CDSB||$1,000||$1,000 amount prorated||Nil|
CDSGs and CDSBs may be paid into a RDSP until the end of the year the beneficiary attains 49 years of age. CDSG and CDSB entitlements that are unused since the coming into force of the RDSP in 2008, may be carried forward ten years, subject to certain prescribed limitations.
23 These thresholds, indexed annually, are those used to establish the rights for 2018, considering the income declared in 2016. The net family income of the parents (or tutors) is considered until the beneficiary attains 19 years of age, following which time the relevant income is the income of the beneficiary and his/her spouse even if the beneficiary still lives with his/her parents.
Payments from an RDSP must start before the end of the year the beneficiary attains 60 years of age. The annual payments are subject to a limit based on the life expectancy of the beneficiary and the FMV of the property held in the plan. However, the beneficiary, or his/her legal representative, may make withdrawals for certain purposes and in amounts specified in the plan.
The contributions are not deductible for tax purposes and are not taxable when withdrawn. The investment income and the capital gains realized in the plan and the grants and bonds that have been put into the plan are taxable in the hands of the beneficiary when he/she withdraws them.
Eligible investments and anti-avoidance rules
An RDSP can generally hold the same type of investments as an RRSP. The anti-avoidance rules applicable to RRSPs also apply to RDSPs (see Section VIII).
Repayment of CDSGs and CDSBs
CDSGs and CDSBs put into an RDSP during the 10 years preceding a withdrawal from the plan, the end or deregistration of the RDSP or the death of the beneficiary must be repaid (in full or in part) to the government. In the case of a withdrawal, for each dollar withdrawn from the plan, $3 of the CDSG or CDSB must generally be repaid. The total CDSG and CDSB amount must be repaid when an RDSP ends or is deregistered or on the death of the beneficiary.
Refunded amounts that were previously included in the beneficiary’s taxable income are tax-deductible.
End of Plan
An RDSP must be ended on the death of the beneficiary. The funds in the RDSP are then paid to the beneficiary’s estate. The amount received, net of the contributions and any repayments, has to be included in the taxable income of the beneficiary for the year of death.
Since March 19, 2019, an RDSP can remain open even if the beneficiary no longer qualifies for the disability tax credit.24 Some restrictions apply however during this period. For example, no contributions may be made to the RDPS and no entitlement to CDSGs or CDSBs may accrue during this period.
24 Before March 19, 2019, an RDSP had to be ended when the plan beneficiary no longer qualified for the disability tax credit, subject to the possibility for the plan holder to file an election to extend the RDSP during this period (subject to certain conditions).
This document is up to date as of August 1, 2019 and reflects the status of legislation, including proposed amendments at this date.