Disability Savings Plan (RDSP)

The plan holder is the qualifying individual who opens an RDSP; they authorize all transactions and make or authorize contributions on behalf of the beneficiary. The beneficiary must meet the following criteria:

• Eligible for the Disability Tax Credit (DTC),
• Under the age of 60 (if they are 59, they must apply before the end of the calendar year in which they turned 59),
• A Canadian resident at the time the plan is entered into, and who has a Social Insurance Number (SIN).

Parents or legal guardians can be the holder of an RDSP, meaning they can open an RDSP for a qualified child beneficiary. When the beneficiary reaches the age of majority and is contractually competent to enter into the plan, he or she becomes the holder of the account, while the parent or legal guardian can remain on the account as a joint holder.

If the beneficiary is contractually competent and the age of majority, he or she can open his/her own RDSP.

Once an RDSP beneficiary reaches the age of majority, that person is the legal holder of the account unless he or she is declared legally incompetent. Note that parents or legal guardians can remain as joint holders on RDSP accounts in situations where they have set up an RDSP prior to the beneficiary reaching the age of majority.

The lifetime contribution limit for an RDSP is $200,000. There is no annual contribution limit and contributions can be made until the end of the year the beneficiary turns 59.

An RDSP can be opened when the child becomes DTC eligible and has a valid Social Insurance Number. Contributions can be made until the end of the year the beneficiary turns 59.

There are two ways to withdraw funds from a RDSP:

• Annual payments. The beneficiary receives payments which are payable at least annually, or Lifetime Disability Assistance Payments
  (LDAPs), for the duration of his or her life or until the plan is terminated. These payments must begin by the end of the calendar year in which the beneficiary turns 60. Only the earned income and the grant portion (CDSG, CDSB) of LDAPs are taxed as income. The contributions are not taxed.
• One-time payments. A beneficiary can receive a one-time payment, called a Disability Assistance Payment (DAP), at any time once the RDSP is established. This payment will be taxed as income in the year of the withdrawal. Only the earned income and the grant portion (CDSG, CDSB)
  of a DAP is taxed as income. The contributions are not taxed.

A plan holder’s eligibility for government benefits (GST credit, Canada Child Benefit) will not be affected by withdrawals from an RDSP.