What is a Registered Disability Savings Plan (RDSP)?

RDSP (Registered Disability Savings Plan) - is a special savings plan designed for people with disabilities in Canada. To open this plan, the individual must have the Disability Tax Credit (DTC).

This plan allows individuals to save and invest money for their future needs. An important feature is that funds in the RDSP grow tax-deferred, which helps increase the savings amount.

How RDSP works:

Grants and Bonds:
The Government of Canada pays grants (Canada Disability Savings Grant - CDSG) to the RDSP. The amount of the grants depends on the income of the person's family, the age of the recipient, and the amount deposited into the RDSP.
To receive the Canada Disability Savings Bond (CDSB), the income must be below a certain threshold (until the individual reaches adulthood, the income of the parent/guardian or parents/guardians is considered).

Owner Contributions:
The RDSP owner or others can contribute funds to the account, and this money grows with tax deferral, allowing tax payments to be delayed until funds are withdrawn.

Withdrawal of Funds:
There is no strict requirement to start withdrawing funds at the age of 60. However, mandatory payments (Lifetime Disability Assistance Payments - LDAPs) must begin no later than the end of the year in which the beneficiary turns 60.
Withdrawal restrictions are waived if the individual has a terminal illness (up to 12 months as per a doctor’s opinion).
If funds are withdrawn before the required time, the Holdback Rule applies — all grants and bonds received in the last 10 years must be returned.
Grants and the Canada Disability Savings Bond (CDSB) are provided until the year the beneficiary turns 49.

Important Limitations and Features:

• Grants and the Canada Disability Savings Bond (CDSB) stop being paid after the year the beneficiary turns 49.

• To receive grants, the individual must meet specific income requirements and be registered to receive the Disability Tax Credit (DTC).

• The Holdback Rule requires returning grants and bonds received in the last 10 years if funds are withdrawn before the established date.

• An individual can only have one RDSP at any given time. This means only one RDSP can be opened per person (but it can be transferred to another bank or financial institution).

• RDSP must be opened at a financial institution offering the plan (usually at a bank).

What Happens in the Event of the RDSP Owner's Death:

• If the beneficiary dies after turning 60 (e.g., at age 61), there is no need to return the grants and bonds to the government.

• If the beneficiary dies before 60, upon account closure, all grants and bonds received in the last 10 years must be returned to the government.

• Personal contributions to the account are passed to the heirs tax-free. Investment income and government contributions (grants and bonds) are included in the taxable income of the deceased's estate.

Grant and Bond Amounts and How They Are Calculated:

• Canada Disability Savings Grant (CDSG): The maximum grant amount over a lifetime is $70,000.

• Canada Disability Savings Bond (CDSB): The maximum bond amount over a lifetime is $20,000.

Grants and bonds can be received from the time the RDSP is opened until the end of the year the beneficiary turns 49.
Upon opening an RDSP, grants and bonds for the past 10 years can be obtained (if unused rights are available).

Information about amounts and RDSP can be found at this link:
https://www.canada.ca/en/employment-social-development/programs/disability/savings/how-much.html