In 2007, the federal government established Registered Disability Savings Plans (RDSPs) as an incentive for families to save so that surviving family members who are disabled have long-term financial security.
What is an RDSP?
A registered disability savings plan (RDSP) is a savings plan to help families, parents and others save for the long-term financial security of a person who is eligible for the disability tax credit. Plan holders are allowed to invest up to $200,000 in a tax-deferred account on behalf of a disabled beneficiary. Contributions are not tax deductible but the money in the plan can grow tax-free and only the beneficiary will pay taxes on the money he or she withdraws from the plan. Contributions can be made until the end of the year in which the beneficiary turns 59.
Who can open an RDSP?
If the beneficiary has reached the age of majority then an RDSP can be opened by the beneficiary or a legal parent.
If the beneficiary is a minor, then another person can open an RDSP for the beneficiary and become a plan holder if that person is the beneficiary’s legal parent, guardian, or tutor or is an individual or public department, agency or institution legally authorized to act for the beneficiary.
Where can I open an RDSP?
RDSPs are available from a number of banks and other financial institutions, including credit unions and investment firms, throughout Canada. A complete list of these financial institutions can be found here:
https://www.canada.ca/en/employment-social-development/programs/disability/savings/rdsp.html
Can anyone contribute to an RDSP?
Yes, anyone can contribute to an RDSP as long as they have the written permission of the plan holder.
How can a beneficiary receive payments from their RDSP?
There are two ways a beneficiary can receive payments from their RDSP:
-
Annual payments
Annual payments, called Lifetime Disability Assistance Payments, can start at any age but must begin by the end of the year in which the beneficiary turns 60. These annual payments will then continue for the life of the beneficiary.
-
One-time payments
This form of payment is known as a Disability Assistance Payments (DAPs) and can be paid to the beneficiary any time after the RDSP is established.
For more details about these payments contact your financial institution or visit the Canada Revenue Agency website.
What are the benefits of an RDSP?
RDSPs allow plan holders to save up to $200,000 in a tax-deferred account and the money in the plan can grow tax-free.
The Government of Canada also offers special savings incentives when a contribution is made to an RDSP. These incentives include:
Canada Disability Savings Grant
The Government of Canada provides matching grants of up to 300% on RDSP contributions depending on the amount contributed and the beneficiary’s family income. The maximum grant amount is $3,500 each year, with a limit of $70,000 over the beneficiary’s lifetime.
Information on the Canada Disability Savings Grant
Canada Disability Savings Bond
Through the Canada Disability Savings Bond, the Government of Canada deposits up to $1,000 per year into the RDSPs of qualified low-income and modest-income Canadians up to a limit of $20,000 over the beneficiary’s lifetime.
Information about Canada Disability Savings Bonds and how to qualify