Registered Disability Savings Plan (RDSP)

An RDSP is a registered savings plan established by the Federal Government to assist families in saving for the long-term financial security of individuals with severe disabilities. Government matching and extra funding for low-income beneficiaries form part of the Plan. Contributions to the plan are not tax deductible, but the earnings grow tax deferred while held in the plan. 

The account holder is the individual who opens the RDSP, makes contributions to the plan and authorizes third party contributions. 

The beneficiary is the person with the disability who will benefit from the RDSP.

To qualify to be an RDSP beneficiary, you must:

• Be eligible for the Disability Tax Credit
• Be a resident of Canada
• Be less than 60 years of age
• Have a valid Social Insurance Number 

A person is DTC-eligible in a tax year if they have a severe and prolonged physical or mental impairment, and meet other eligibility criteria to qualify for the credit under section 118.3 of the Income Tax Act. To be entitled to the credit, Form T2201, Disability Tax Credit Certificate, must have been completed by a qualified physician or nurse practitioner and submitted to the Canada Revenue Agency for approval. CRA typically takes 8 weeks to review the application. Check CRA processing times - Canada.ca. For more information on the disability tax credit, see Persons with disabilities on the CRA website.

If someone is interested in opening an RDSP but hasn’t already applied for the DTC, they must be approved for the DTC prior to opening an RDSP. If an RDSP account is opened, grant and bond monies will not be payable until the DTC approval has been verified.

The following can open an RDSP and become the holder of the plan: 

• A beneficiary who has reached the age of majority 
• A legal parent, guardian, tutor, curator of the beneficiary, or an individual who is legally authorized to act for the beneficiary 
• A public department, agency, or institution that is legally authorized to act for the beneficiary. 
• When a beneficiary’s capacity is in doubt an RDSP can be opened by a Qualifying Family Member, this includes a parent, sibling, spouse or common-law partner. This provision is available until 2026. 

Anyone can make a contribution to an RDSP for a beneficiary, with the holder’s written consent.

A maximum amount of $200,000 can be contributed to each beneficiary’s RDSP, and contributions can be made until December 31st of the year the beneficiary turns 59. This is a lifetime limit and is not reset if an RDSP is transferred or closed and later re-established. There is no annual contribution limit.

Qualified investments for RDSPs are generally the same as those for Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) and include cash, stocks, bonds, GICs, mutual funds and a variety of other investments. A Mackenzie RDSP can hold Mackenzie mutual funds. A full list of eligible funds can be found later in this document. 

The Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) are federal programs that provide payments to RDSPs to encourage long-term savings through an RDSP. Grants and bonds are available to beneficiaries up until December 31st in the year they reach age 49. Contributions can be matched, based on family net income, with up to $70,000 in Canada Disability Savings Grants and up to $20,000 in Canada Disability Savings Bonds.

There are two types of withdrawals (payments) from an RDSP:

a. Lifetime Disability Assistance Payments (LDAPs) – recurring annual payments that continue until funds within the account have been depleted or the beneficiary’s death. Payments can begin at any age but must commence by the end of the year in which the beneficiary turns age 60.

b. Disability Assistance Payments (DAPs) – periodic lump sum payments that can be paid to the beneficiary any time after the RDSP is established.

These payments may be subject to the Assistance Holdback rules.

The Assistance Holdback Amount (AHA) is made up of all grant and bond that was deposited to the RDSP in the 10 years prior to a withdrawal. The purpose of the AHA is to ensure that RDSPs are used for long-term savings, and also to ensure that government funds contributed are not withdrawn and used as leverage for matching grants in future years. 

RDSP withdrawals are made up of contributions, growth, grants and bonds. Contributions are generally not taxable, while income growth, grants and bonds are taxable in the hands of the beneficiary. Contributions are taxable if the source of the contribution was a rollover of RRSP/RRIF or RPP monies of a deceased supporting parent or grandparent or a rollover from the AIP from an RESP.

When a beneficiary makes a withdrawal from an RDSP the government will look to see if any grant or bond was contributed to the account in the 10 years prior to the withdrawal. If it was for every $1 redeemed $3 of grant/bond needs to be repaid to the government.