Investments

RDSP — Registered Disability Savings Plan

Long-term financial security for a person with a disability, and by some distance the most generous registered plan for those who qualify. The government adds matching grants, and for lower-income households it adds bonds even where nothing is contributed at all.

Eligibility

Who can open one

The Disability Tax Credit comes first

An RDSP can only be opened for someone approved for the Disability Tax Credit. A medical practitioner completes CRA Form T2201 and the CRA decides. Nothing else can happen until that approval is in place, and it is the step that most often delays things — so start there.

The other conditions

The beneficiary needs a valid social insurance number and must be a resident of Canada when the plan is opened and when contributions are made. The plan has to be opened before the end of the year the beneficiary turns 59, and grants and bonds are only paid up to the end of the year they turn 49.

That age limit matters more than any other detail on this page: every year an eligible plan goes unopened is a year of grant and bond that cannot be recovered later.

It does not reduce disability benefits

Provincial and territorial disability benefits are generally not clawed back because of money held in an RDSP. This is the fear that stops families opening one, and in most provinces it is unfounded — but the rules are provincial, so confirm for your own.

Government Support

Grants and bonds

The grant matches contributions

The Canada Disability Savings Grant matches what is paid in, at a rate that depends on family income — lower incomes attract a higher matching rate on the first slice of contributions. There is an annual maximum and a lifetime maximum, and unused entitlement can generally be carried forward for a number of years.

Because the matching rate is tiered, the first few hundred dollars contributed each year are worth far more than the last few hundred. If money is tight, contributing a small amount consistently collects more grant than a single large contribution.

The bond needs no contribution

The Canada Disability Savings Bond is paid into the plans of lower-income beneficiaries whether or not anything is contributed. If the household qualifies, opening the plan is the only action required to start receiving it.

Growth is sheltered

Everything inside the plan grows tax-deferred. When withdrawals begin, the contributions come back untaxed; the grants, bonds and growth are taxable in the beneficiary\’s hands, which for most beneficiaries means little or no tax.

Withdrawing too early can cost you the grants. Grants and bonds paid into the plan in the previous ten years may have to be repaid if money is withdrawn — the ten-year rule. An RDSP is a long-term plan by design, and taking money out early can undo years of government contribution. Take advice before any withdrawal.

No obligation

Start with the Disability Tax Credit.

If the DTC is not yet approved, that is the first and only step that matters — everything else follows from it. An advisor can talk you through the application and what to expect, and then through opening the plan once it is granted.

Talk to an advisor

RDSP questions

There is a lifetime limit of $200,000 in contributions per beneficiary, but no annual limit — you can contribute as much as you like in a year up to that total. Only contributions within the grant thresholds attract matching, though.

Yes. The Canada Disability Savings Bond is paid to qualifying lower-income beneficiaries with no contribution required. Opening the plan is what triggers it.

The beneficiary if they are of age and able to manage their affairs, or a parent, guardian or legal representative otherwise. Where capacity is in question the rules vary by province and it is worth getting this right at the outset.

DTC approval runs for a set period and has to be renewed. If it lapses the plan generally has to be closed and some government money repaid, so keep track of the renewal date — this catches families out.

In most provinces RDSP assets and withdrawals are exempt from disability benefit calculations, which is the whole design intent. Rules are provincial, so confirm for yours before relying on it.

Planning for long-term security?

Call 437-428-2828 and talk it through with a licensed advisor. Mon–Sat, 9am–8pm ET. No obligation, and nobody will push you to buy on the call.

Call 437-428-2828