RDSP Basics: What Every Canadian Should Know

Basics, Background, and Benefits

The Registered Disability Savings Plan (RDSP) provides eligible individuals with disabilities and their family members the opportunity to save in a tax-deferred environment.

Who Can Open an RDSP?

Anyone who is eligible for the Disability Tax Credit may open an RDSP, as long as they apply before December 31 of the year they turn 59, have a Social Insurance Number (SIN), and are a resident of Canada. Parents and guardians can establish an RDSP on behalf of minor children, assuming they also have a valid SIN.

Contributions and Withdrawals

The maximum lifetime contribution limit is $200,000, but there is no annual contribution limit. Contributions are not tax-deductible, but funds can grow on a tax-deferred basis. Additional funding is available in the form of the Canada Disability Savings Grant and the Canada Disability Savings Bond.

Canada Disability Savings Grant:

• The grant is a matching program based on contributions made to the account and net family income. The CRA uses adjusted net family income reported on tax returns from two years prior to determining grant eligibility
• The annual maximum entitlement is $3,500 if your adjusted family net income is below the threshold. The lifetime maximum is $70,000
• The annual maximum entitlement is $1,000 if your adjusted family income is above the threshold
• Grants can be received until the year the beneficiary turns 49
• You can carry forward up to 10 years of unused grant entitlements; the maximum amount of grants you can receive in a single year is $10,500

Canada Disability Savings Bond:

• This is paid by the government based on net family income, and no contributions are necessary to receive the bond
• The bond is $1,000 annually, up to a lifetime maximum of $20,000
• Beneficiaries can receive this until the year they turn 49
• You can carry forward up to 10 years of unused bond entitlements

Regular withdrawals from the plan must begin by December 31 of the year you turn 60. If you withdraw funds prior to turning 60, you may need to repay grants and bonds received within the last 10 years. Withdrawals can either be made in the form of Disability Assistance Payment (DAP), which is a one-time withdrawal paid to the beneficiary or the estate, or a Lifetime Disability Assistance Payment (LDAP), which is a recurring payment paid directly to the beneficiary. Taxable amounts are grants, bonds, and investment gains; the original contributions are not taxed.

What Can You Hold in an RDSP?

RDSPs can generally hold the same investments as other registered accounts. You should always discuss with your financial advisor to ensure that investments are appropriate for an RDSP.

Contact us if you would like to learn more about RDSP accounts.