Registered Disability Savings Plans (RDSPs)

Disability assistance payments

Differentiating a lifetime disability assistance payment (LDAP) from a disability assistance payment (DAP)

A disability assistance payment (DAP) is any payment made from a disability savings plan to the beneficiary or to the beneficiary's estate after the death of the beneficiary. In order to be registered, a plan must stipulate whether or not disability assistance payments that are not lifetime disability assistance payments are to be permitted under the plan; however, the issuer is still required to include a provision to allow beneficiary directed disability assistance payments as outlined in subparagraph 146.4(4)(n)(iii) of the Income Tax Act.

A lifetime disability assistance payment (LDAP) is a disability assistance payment that is identified in the disability savings plan as a lifetime disability assistance payment. Once a lifetime disability assistance payment begins to be paid, it must continue to be paid at least annually until the beneficiary dies or the plan is terminated.

Determining When an Issuer should Pay a DAP or an LDAP from a Plan

In general, if the terms of the RDSP permit, DAPs may be made to a beneficiary of an RDSP at any time with the following exceptions:

A DAP cannot be paid if it would cause the value of the RDSP's assets to fall below the assistance holdback amount, which could result in the RDSP being unable to satisfy an obligation to repay Canada Disability Savings Grants and Bonds to the Minister of HRSDC under the Canada Disability Savings Act.

LDAPs must begin to be paid no later than the end of the calendar year in which the beneficiary turns 60 and once they begin to be paid, they must continue to be paid at least annually. The only exception to this is if the RDSP is being opened in a year when the beneficiary is 60 years of age or older (which can occur only if the plan is being set up to receive funds transferred from another RDSP of the beneficiary). In this case, LDAPs must begin to be paid before the end of the year following the year in which the RDSP is set up.

If immediately before the beginning of the year all government contributions are greater than all holder contributions in the plan, then the total of all DAPs for the year must be limited by the formula in paragraph 146.4(4)(l) of the Income Tax Act (this rule does not apply if the year is a specified year).