Registered disability savings plans (RDSPs)
Frequently asked questions
1. Who can be a beneficiary under an RDSP?
2. Can there be more than one beneficiary under an RDSP?
3. Can a beneficiary have more than one RDSP?
4. Who can open an RDSP?
4(a). What do the terms "legally authorized to act for" and "competent to enter into an arrangement" mean?
5. Can there be more than one holder under an RDSP?
6. Can the holder of an RDSP be changed?
7. Does the holder need to be a resident of Canada?
8. Who can contribute to an RDSP?
9. How long can contributions be made to an RDSP?
10. How does an issuer set up a disability savings plan specimen?
11. Who can be an issuer of an RDSP?
12. How does an issuer amend an approved specimen plan?
13. When is an RDSP considered registered?
14. When is an RDSP no longer considered registered?
15. What are the Canada Disability Savings Grant and the Canada Disability Savings Bond?
17. Why are RDSPs communicated to a financial institution as "pending" when a DSP
is considered registered at the time of signature?
18. What is the difference between a Disability Assistance Payment (DAP) and a Lifetime Disability Assistance Payment (LDAP)?
19. When must LDAPs commence?
20. Are there limitations to the amount of payments that can be made in a calendar year?
21. Can a beneficiary who is not the sole holder of their RDSP request a DAP or LDAP?
22. Are the limitations in answers 20 and 21 applicable if the plan is in a specified year?
23. What are the scenarios under which a holder could terminate the beneficiary's RDSP?
24. What is a specified RDSP payment (rollover)?
25. When can individuals begin requesting rollover transactions to an eligible beneficiary's RDSP?
26. Can an individual take advantage of this rollover measure if amounts were received from a parent or grandparent's retirement plan before March 3, 2010?
27. Will an issuer be required to amend their trust agreement(s) and currently approved specimen plan(s) in order to administer the rollover measure?
28. What are the steps an issuer must take to complete a rollover transaction?
29. Are there limits to when a rollover can be made or limits to the amount that can be rolled into an RDSP?
30. How is the rollover amount to be treated for the purposes of determining the maximum amount of DAP or LDAP that can be paid from an RDSP in a calendar year?
31. How is the rollover amount to be incorporated in a DAP or LDAP upon a withdrawal from an RDSP?
32.Will a rollover amount attract a Canada Disability Savings Grant when it is paid into an RDSP?
33. If an RDSP has accepted a rollover can the RDSP be transferred to an RDSP that doesn't accept rollovers?
34. Are partial transfers of an RRSP refund of premiums, RRIF eligible proceeds, or RPP lump sum amounts allowed? For example an RDSP beneficiary receives $100,000 of eligible proceeds from their grandparent's RRIF but wishes to only roll over $50,000 into their RDSP. Is this allowed?
A.1 – A person who is a resident of Canada who has a valid Social Insurance Number and who is a disability tax credit (DTC)-eligible individual.
A person is DTC-eligible in a tax year if they have a severe and prolonged physical or mental impairment, and they or another person is entitled to a credit under section 118.3 of the Income Tax Act (read without reference to paragraph 118.3(1)(c)).
To be entitled to the credit, Form T2201, Disability Tax Credit Certificate, must have been completed by a qualified practitioner and submitted to the Canada Revenue Agency for approval. For more information on the disability tax credit, see Persons with disabilities.
A.2 – No. There can only be one beneficiary under the plan. The beneficiary stays the same throughout the lifetime of the plan.
A.3 – No. Only one plan can be established for a beneficiary.
The only exception to this rule is when funds are being transferred from one RDSP to another. The first plan must be ended within 120 days of the new plan being established.
A.4 – A beneficiary can open an RDSP and become the holder of the plan.
If the beneficiary is a minor, another person can open an RDSP for the minor and become the holder if that person is:
- a legal parent of the beneficiary;
- an individual who is legally authorized to act for the beneficiary such as a legal guardian, tutor or curator of the beneficiary; or
- a public department, agency, or institution that is legally authorized to act for the beneficiary.
A beneficiary may have reached the age of majority but not be competent to enter into an arrangement. If so, another person can open an RDSP for the beneficiary and become the holder if they are:
- an individual who is legally authorized to act for the beneficiary such as a guardian, tutor, or curator of the beneficiary; or
- a public department, agency, or institution that is legally authorized to act for the beneficiary.
A legal parent who would not otherwise be able to open an RDSP for an adult beneficiary (either because the beneficiary is competent or because the beneficiary is not competent and the parent has no legal authorization over the beneficiary's affairs) may do so if the parent is, at that time, the holder of a pre-existing RDSP for the beneficiary. This ensures that the parent can transfer to a new RDSP.
A.4(a) –An individual or body is legally authorized to act for a beneficiary if they have been appointed as such through the laws of the province in which the beneficiary resides. The rules surrounding whether or not a beneficiary is competent to enter into an arrangement are determined through provincial regulatory bodies. The federal government does not determine legal authority nor does the federal government determine who is competent to enter into an arrangement.
A.5 –Yes. For example, the legal parents of an underage beneficiary can both be holders of one plan for the beneficiary. Once the beneficiary becomes an adult, the parents and the beneficiary can be joint holders of the plan.
Q.6 – Can the holder of an RDSP be changed?
A.6 – Yes. Over the lifetime of a plan, the holder can change. For example, if the mother establishes the plan and is the holder, after her death the beneficiary or the beneficiary's subsequent legal guardian can become the plan holder. If at any time the plan holder (other than a legal parent) ceases to be an eligible holder, they must be replaced with someone who is eligible to be a holder of the plan.
A.7 –No. The holder does not have to be a resident of Canada but they must hold a valid Social Insurance Number or Business Number. However, the beneficiary must be a resident of Canada when the plan is opened and when each contribution is made to the plan.
A.8 – With the holder's written consent, anyone can make a contribution for a beneficiary under an RDSP.
A.9 – Contributions can be made to a plan until the earliest of:
- the beneficiary's death;
- the end of the year in which the beneficiary reaches 59 years of age;
- the time when contributions to the plan (and any prior RDSP of the beneficiary) total $200,000;
- the time when the beneficiary no longer qualifies for the DTC; and
- the beneficiary is no longer resident in Canada for tax purposes.
A.10 – The issuer must submit a copy of the terms of the specimen plan, including the declaration of trust and the application form, to the Registered Plans Directorate for approval. The terms of the plan must meet the requirements under section 146.4 of the Income Tax Act.
A.11 – An issuer of an RDSP must be a trust company licensed or authorized to carry on business in Canada.
The issuer of an RDSP must also have entered into an agreement with Employment and Social Development Canadafor the administering of the Canada Disability Savings Grant and the Canada Disability Savings Bond programs.
A.12 – The issuer must submit any amendment it wants to make to the specimen plan to the Registered Plans Directorate for review. After an amendment has been approved, the issuer must notify the holder of the amendment and can market any future plans based on the amended specimen plan.
A.13 – An RDSP is considered registered if the beneficiary is DTC eligible in the taxation year the plan is established and all the conditions of subsection 146.4(2) of the Income Tax Act have been met. This includes:
- the specimen plan has been submitted to the Registered Plans Directorate and is approved;
- the social insurance number (SIN) of the beneficiary of the plan and the SIN or Business Number of the holder(s) have been provided to the issuer; and
- when the plan was established, the beneficiary was resident in Canada.
The issuer must submit the information no later than 60 days after the plan is established.
A.14 – An RDSP is no longer considered registered when it fails:
- to comply with any of the conditions under subsection 146.4(4) of the Income Tax Act (excluding the condition where the plan must be operated solely for beneficiary's benefit);
- to comply with any requirements of the Canada Disability Savings Act or its regulations; or
- to be administered (at any time) in accordance with the terms of the plan.
The Minister of National Revenue may defer or waive the deregistration of a plan in certain circumstances.
A.15 –The Canada Disability Savings Grant and the Canada Disability Savings Bond are federal programs that provide payments to RDSPs. More information about these payments can be found at Employment and Social Development Canada.
A.17 –The law requires that a beneficiary must be a resident of Canada, be eligible for the disability tax credit (disability amount), and have a valid Social Insurance Number (SIN) in order to avoid having the registered status of the disability savings plan nullified. In the case of an individual holder of a plan, they must be a qualifying person in relation to the beneficiary and also have a valid SIN. In order to ensure these requirements are met, the Government of Canada captures the given name, surname, and date of birth of both the beneficiary and all holders contained on the RDSP application form and compares them with the equivalent information held by the relevant government database (the Social Insurance Registry (SIR)).
If the information recorded on the application form does not exactly match the equivalent information within SIR, the government places a hold (pending status) on the arrangement until the information is corrected and all validations have passed.
Once the beneficiary and holder SINs have passed the SIR validation, the DTC eligibility of the beneficiary will be validated with the Canada Revenue Agency. The arrangement will remain in pending status until such time as all required information is successfully validated.
In order to avoid this processing delay, the financial institution should ensure that the holder verifies the following:
A) Confirm that Form T2201, Disability Tax Credit Certificate has been filed with CRA and approved before opening an RDSP account. It is also important to ensure that the Disability Tax Credit is claimed in the year in which the RDSP is opened.
Please note that if the beneficiary is an adult, the CRA is restricted to providing disability amount information to the beneficiary or an authorized representative of the beneficiary. To find out how to become an authorized representative please contact the CRA general enquiries line at 1-800-959-8281.
B) If a parent or guardian filed a Form T2201 for the beneficiary when the beneficiary was a child and at the time of filing the beneficiary had no SIN, ensure the holder has contacted the CRA general enquiries line at 1-800-959-8281 with the following information:
- Beneficiary's SIN
- SIN of the individual who requested the disability amount on behalf of the beneficiary (or if not certain, the person currently claiming the disability amount).
C) If the beneficiary is a child, the Canada Child Tax Benefit (CCTB) has been applied for and the primary caregiver who is named on the RDSP application form is the person who is receiving the CCTB payment at the time the RDSP is entered into. Please note that if the child is maintained by an agency then the primary caregiver named on the RDSP application form should be the institution in receipt of the Children's Special Allowance at the time the RDSP is entered into.
D) Both the holder and the financial institution's representative should ensure that the name, date of birth and SIN for the beneficiary and all holders of the plan provided on the RDSP application form match the information that was provided to SIR when the SIN was applied for or last updated. Please ensure that the correct date convention is used when filling out the RDSP application form. (In many cases the day and month are accidentally inverted which causes problems during the validation process. For example, DD/MM/YYYY is the date convention used on the SIN Application Form). The holder can contact SIR at 1-800-206-7218 (choose option 3) to verify that the holder(s) and beneficiary's name(s) and dates of birth are correct.
The financial institution should resubmit the corrected information through the Canada Disability Savings Program system. This step should amend the information that was previously submitted and allow the pending status on the arrangement to be removed.
A.18 –A DAP is a singular payment requested on an ad hoc basis by the plan holder* (or, if applicable, the plan beneficiary - see answer 21) that is made to the beneficiary. A DAP is also an amount that is paid to the beneficiary when the plan must close because they are no longer DTC-eligible or an amount that is paid from the plan to the beneficiary's estate after their death.
An LDAP is a payment that is part of a series of periodic payments. Once the plan holder (or, if applicable, the plan beneficiary - see answer 21) requests an LDAP, these payments must continue to be made to the beneficiary at least annually until plan termination or the death of the RDSP beneficiary.
*Please note that an Issuer does not have to provide for holder requested DAPS in their specimen plan.
A.19 –LDAPs must start no later than the end of the calendar year in which the beneficiary turns 60 years of age but, as long as the plan terms are not restrictive, an LDAP can commence at any time the holder requests. In the case of a situation referred to in answer 21, a beneficiary can request that LDAPs begin at any time during the noted period.
A.20 –Yes, there are two universal limitations applicable to DAPs and LDAPs as well as one further limitation for LDAPs:
DAP and LDAP
a) A DAP or LDAP cannot be paid if after the payment was made there would not be enough property in the plan to repay the assistance holdback amount.
b) If, at the beginning of the calendar year, the amount of government contributions* (Grant and Bond) that have been made to the plan exceeds the amount of private contributions* (contributions made by or permitted by the plan holder[s]) that have been made to the plan, then the total amount of DAPs and LDAPs that can be paid from the plan in that year must be limited by the result of the legislated maximum formula.
(Please note that if the beneficiary has reached 59 years of age before the calendar year in which the payments are made, the total amount of DAPs and LDAPs that can be paid from the plan in the year must equal the result of the legislated maximum formula [however if there are not enough funds in the plan to make the required payments, then the payments may be less than the result of the formula]).
If the plan is opened in the calendar year because of a transfer from another RDSP, and the beneficiary is under 59 years of age, DAP and LDAP limits must be associated with the legislated maximum formula results as calculated under the prior plan and the issuer must take into account any payments that were made from the prior plan in the calendar year before making payments from the plan. If the beneficiary was 59 years of age or older in the prior calendar year, the issuer must pay out any DAPs or LDAPs that the prior plan was required to pay but had not yet paid out.
* Please note that this amount also includes contributions made to any prior plan(s) of the beneficiary.
c) If the situations in b) do not apply then the total amount of LDAPs paid in a year must not exceed the result of the legislated maximum formula.
A.21 –Yes, if immediately before the beginning of the calendar year in which the payment is requested, the beneficiary is at least 27 but less than 59 years old and the amount of government contributions* made to the plan exceeds the amount of private contributions* made to the plan, then the beneficiary may request a DAP as well as request the commencement of LDAPs. However, the total amount of DAP and LDAP that can be paid from the plan in that year must be limited by the result of the legislated maximum formula (i.e. the total amount of beneficiary requested payments and holder requested payments made in the year must not be more than the result of the legislated maximum formula).
* Please note that this amount also includes contributions made to any prior plan(s) of the beneficiary.
A.22 –In a specified year, only the limit in answer 20(a) is applicable.
A.23 –At the holder's request, an RDSP can be terminated in the following situations:
- There is no property in the RDSP,
- Only the assistance holdback amount is left in the plan (there are no earnings or private contributions in the plan), or
- The holder requests a payment of all remaining funds in the plan to be made to the beneficiary (applicable if the plan terms provide the holder with the ability to request a DAP) and the payment limitations as detailed in answer 20 are not applicable when the request to remove all funds and terminate the plan is made.
Before terminating an account, issuers should ensure they consider any associated trust laws and requirements before completing the account closure.
A.24 –A rollover is an indirect tax-deferred transfer of certain amounts to an RDSP beneficiary's plan. Rollover amounts must originate from a Registered Retirement Savings Plan, Registered Retirement Income Fund, or Registered Pension Plan of an RDSP beneficiary's parent or grandparent. Such amounts may only be rolled over if the RDSP beneficiary was financially dependent upon the parent or grandparent at the time of the parent or grandparent's death because of a mental or physical infirmity. In general, a rollover may only be made if the parent or grandparent's death occurred after March 3, 2010.
Amounts that can be rolled over to an RDSP generally include a refund of premiums from an RRSP, an eligible amount paid from a RRIF, or a lump sum payment (excluding any actuarial surplus) paid from an RPP.
A.25 –Rollover transactions may begin after June 30, 2011.
A.26 –Yes, if a parent or grandparent's death occurred after 2007 and before 2011 and the RDSP beneficiary was financially dependent upon them at the time of death due to a mental or physical infirmity then the following amounts may be rolled over to the beneficiary's RDSP:
- A refund of premiums from the beneficiary's parent or grandparent's RRSP, an eligible amount paid from their RRIF, or a lump sum payment (other than an amount of actuarial surplus) from their RPP, that is paid to any taxpayer, or
- An amount from the beneficiary's parent or grandparent's RRSP, or an eligible amount paid from their RRIF that had been transferred to a taxpayer's RRSP or RRIF of which the taxpayer had previously claimed a 60(l) deduction and where the taxpayer withdraws the amount or a portion of the amount from the RRSP or RRIF for the purposes of making a rollover to the beneficiary's RDSP.
A deduction for this type of rollover is available only if the rollover transaction is made to an RDSP before 2012.
A.27 –Yes, if an issuer wishes to allow their clients the ability to roll over funds into their RDSPs then the issuer must amend their trust agreement(s) and specimen plan(s) to account for the rollover measure. More information on this requirement can be found in RDSP Bulletin No. 1.
A.28 –The following steps must be taken by the issuer in order for a rollover transaction to be considered complete:
a) The RDSP specimen plan must be amended to allow RDSP arrangements to accept rollover amounts,
b) The RDSP issuer must ensure that all areas of form RC4625 (or equivalent form created by the issuer) are filled out and kept on the beneficiary's RDSP file,
c) The rollover amount must be made to the beneficiary's RDSP, and
d) All required information (as detailed in The Canada Disability Savings Program's Interface Transaction Standards document) must be electronically transmitted to the Canada Disability Savings Program System.
A.29 –Yes, the contribution limits in answer 9 are applicable to all rollover transactions. For example, the $200,000 contribution limit must be adhered to in all cases. If, for instance, the RDSP beneficiary receives $175,000 as a refund of premiums from their deceased parent's RRSP and their RDSP already held $50,000 of private contributions before the rollover request is made, then only $150,000 of the $175,000 may be rolled over into the beneficiary's RDSP.
A.31 –A rollover is to be treated as part of the earnings portion of a DAP or LDAP for the purposes of determining the taxable amounts of an RDSP withdrawal.
A.32 –No, a rollover is not eligible to attract a Canada Disability Savings Grant.
A.33 –No, once an RDSP has accepted a rollover, the rollover funds must be tracked separately for the purposes of paragraphs 146.4(4)(f) to (h) and (n) of the Income Tax Act as well as for determining the taxable amount of a DAP or LDAP. If the issuer of the new RDSP has not set up their plans to accept rollover amounts then they will be unable to account for and properly administer those amounts in accordance with the Act.
Q.34 – Are partial transfers of an RRSP refund of premiums, RRIF eligible proceeds, or RPP lump sum amounts allowed? For example an RDSP beneficiary receives $100,000 of eligible proceeds from their grandparent's RRIF but wishes to only roll over $50,000 into their RDSP. Is this allowed?
A.34 –Yes, a partial transfer is acceptable. There is no requirement to roll over the full amount of eligible proceeds that are received.
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