Your Registered Disability Savings Plan (RDSP)

You can open an RDSP for anyone who meets the following criteria:

• qualifies for the disability tax credit (DTC)
• has a valid social insurance number (SIN)
• is a Canadian resident when the account is first opened
• is under the age of 60 (up until the end of the year in which they turn 59), unless the account is opened to transfer amounts from a beneficiary’s former RDSP, in which case the age limit does not apply

If the beneficiary of an RDSP is under the age of 18, the following people or entities can open an account:

• the beneficiary’s legal parent(s)
• any guardian, tutor, curator, or other individual legally allowed to act for the beneficiary
• any government department, agency, or institution legally allowed to act for the beneficiary

If the beneficiary of an RDSP is over the age of 18 and is able to enter into a contract to open an account, they can do so for themselves. Alternatively, if their legal parent(s) already hold an RDSP for them, the parent(s) can remain holders of the new plan as well. Or, the adult beneficiary can be added as a joint holder.

If the intended beneficiary of an RDSP is over the age of 18 but is not able to enter into a contract to open an account because of their disability, and does not have a pre-existing RDSP from before they turned 18, then any qualifying person, legally allowed to act for the beneficiary, can open and hold an account for them.

If the beneficiary of an RDSP is over the age of 18 but in the opinion of the issuing financial institution their contractual competency is in doubt and the beneficiary does not have a pre-existing RDSP from before they turned 18, then a qualifying family member (QFM) can open an account. A QFM can be a spouse, common-law partner, or parent of the intended beneficiary.

Important: A spouse or common-law partner not living with the beneficiary because of a marriage breakdown is not eligible to be a QFM.

Anybody. As long as they have written permission to do so by the person who opened and holds the account.

No. Unlike with an RRSP, your contributions to an RDSP are not tax deductible. Once inside an RDSP, contributions can grow tax free until paid out to the beneficiary, but there are no tax benefits or implications for the contributor to an RDSP.

As mentioned above, funds inside an RDSP grow tax free until removed. This allows your contributions to benefit from compounding without taxes eating away at their annual growth. But there is another significant benefit – you can receive additional money in your RDSP from the federal government through the following:

The Canada Disability Savings Grant is a Government of Canada payment that matches your contributions to a RDSP by 300%, 200%, or 100% depending on the beneficiary’s circumstances up to $3500 per year and $70,000 over their lifetime.

The Canada Disability Bond is a Government of Canada payment made to the RDSP’s of low-income Canadians of $1000 per year to a maximum of $20,000 over the beneficiary’s lifetime and is made regardless of whether contributions are made to the RDSP.

Note: None of the provinces or territories offer similar grants or bonds to RDSP accounts.

Typically, no. However, there are exceptions.

The Government of Canada along with all provinces and territories exempt all assets held in an RDSP when determining eligibility for federal and provincial/territorial disability benefits. So, simply having an RDSP will not affect a beneficiary’s other disability benefits.

The Government of Canada and most provinces and territories also exempt all money that’s taken out of an RDSP when determining eligibility for provincial/territorial disability benefits. The exceptions are New Brunswick, Prince Edward Island, and Québec, where money taken out of an RDSP is only partially exempt.

There are two types of payments made to a beneficiary from an RDSP, disability assistance payments (DAP) and lifetime disability assistance payments (LDAP). There is also one very important restriction to be aware of; the assistance holdback amount (AHA).

Note: The AHArequires that any CDSG or CDSB deposited into an RDSP must remain in the account for a minimum of ten years. Therefore, any DAPs or LDAPs will trigger a repayment of $3 of CDSG or CDSB received in the previous ten years for every $1 requested by the beneficiary.

A DAP is a singular payment made to the beneficiary of an RDSP, or their estate, to be used for anything they want. For example, a beneficiary’s wheelchair may need replacement, so they request a DAP to pay for a new one.

Note: Not all RDSP accounts allow DAPs. Be sure to confirm that DAPs are allowed with the financial institute when opening an RDSP.

An LDAP is a regularly occurring payment, paid annually at a minimum, that must begin no later than December 31 of the year the beneficiary turns 60. These payments will continue until the RDSP is emptied or the beneficiary passes away.

The calculation of these repayment amounts is complicated and with significant implications to the beneficiary of an RDSP. We strongly recommend speaking with a financial advisor before making any withdrawals from an RDSP.

Yes, but not entirely. Each payment (DAP or LDAP) received from an RDSP includes three parts:

• contributions
• government grants and bonds
• income and growth from investments

All contributions made to an RDSP can be removed from the account tax free.

The government grants and bonds, along with any income and growth from your investments (including those from contributions) are considered income by the Canada Revenue Agency (CRA) and Revenu Québec (RQ) and are taxable.

Note: As of January 1,2014, financial institutions administering RDSPs will withhold income taxes on the taxable portion of RDSP withdrawals. The beneficiary will receive a T4A slip to report this income and income tax paid on their tax return.

There are several tax credits available to Canadians with disabilities that can reduce the amount of tax paid on RDSP withdrawals. To find out which ones could benefit you or your disabled dependant, refer to this CRA guide and Revenu Québec brochure.

Follow these steps in H&R Block's 2024 tax software:

1. On the left navigation menu, click the Government slips tab, then Smart Search.
   
2. Type T4A in the search field and either click the highlighted selection or press Enter to continue.
   
   
3. When you arrive at the T4A page, enter your information into the tax software.