6- 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.³⁰ 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.

Grants and Bonds Available³¹

RDSP contributions are eligible for the CDSG, up to the following amounts:

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:

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, may be carried forward ten years, subject to certain prescribed limitations.

Payments

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The contributions are not deductible for tax purposes and are not taxable when withdrawn.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 In the case of a withdrawal, for each dollar withdrawn from the plan, $3 of the CDSG or CDSB must generally be repaid.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.

An RDSP can remain open even if the beneficiary no longer qualifies for the disability tax credit. 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.

Plan Transfers

For RRSP, RRIF or RPP transfers upon death, see Section XI. For an RESP transfer to an RDSP, see Section III.

³⁰ Under a temporary measure expiring on December 31, 2026, a parent, spouse, common-law spouse or brother or sister may set up a plan for an adult whose ability to contract is in doubt.

³¹ The family income thresholds for these grants and bonds are indexed annually. The thresholds presented in the following tables are those used to establish the rights for 2024, considering the income declared in 2022. The net family income of the parents (or tutors) is considered until the beneficiary reaches 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.