RDSP FAQs

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. To be entitled to the credit, Form T2201, Disability Tax Credit Certificate, must have been completed by a qualified physician or nurse practitioner and submitted to the Canada Revenue Agency for approval. For more information on the disability tax credit, see Persons with disabilities on the CRA website (www.cra-gc.ca)

If someone is interested in opening an RDSP but hasn’t already applied for the DTC, they must be approved for the DTC prior to opening an RDSP. If an RDSP account is opened, grant and bond monies will not be payable until the DTC approval has been verified. 

No, a beneficiary can only have one RDSP at any one time. However an RDSP can be transferred from one institution to another. The new RDSP will be “pending” until the transferring institution has closed the original RDSP. 

No, there can only be one beneficiary under the plan, and the beneficiary must remain the same throughout the lifetime of the plan.

The following can open an RDSP and become the holder of the plan:

• A beneficiary who has reached the age of majority 
• A legal parent, guardian, tutor, curator of the beneficiary, or an individual who is legally authorized to act for the beneficiary 
• A public department, agency, or institution that is legally authorized to act for the beneficiary. 
• Qualified Family Member, this includes a parent, adult sibling, spouse or common-law partner. This provision is available until 2026. 

Yes. RDSP accounts can be opened for eligible individuals until Dec. 31st of the year the beneficiary turns 59. (Note: government matching does not apply for individuals over age 49, since the grants and bonds must be held in the account for a minimum of 10 years or be subject to repayment to the Government). 

Yes. The legal parents of a minor beneficiary may be joint holders of an RDSP. When a beneficiary reaches age of majority they can be added as a joint account holder with their parent. 

Yes. If the parent has been legally appointed as a guardian of the beneficiary or is otherwise authorized to act for the beneficiary, that parent can be the holder whether the child is a minor or over the age of majority. The Minister of Finance made a change to the existing rule in Budget 2012. Under the new rules a “qualifying family member” is allowed to establish an RDSP for a beneficiary who is not contractually competent. The definition of a qualifying family member is only a spouse, common-law partner or a parent. This is a temporary change and applies from July 2012 to the end of 2023. Even though this is temporary it is important to note that the account holder is able to remain as account holder beyond 2023. It is simply that any new RDSPs cannot be opened this way after 2023. 

Generally speaking, yes. One parent can be the holder, both can be joint holders or one or both can be joint holder with the beneficiary. In the case of a minor beneficiary, if the account holder is not the recipient of the Canada Child Benefit (CCB) then the recipient of the CCB must be identified in the primary caregiver section of the application. 

Yes. A guardian or other representative who is legally authorized to act on behalf of the beneficiary may be holder or joint holder of the plan. 

As with any other type of plan offered by Mackenzie, an interested client can open a plan through their financial advisor. 

The year a doctor attests in writing that the beneficiary is not likely to survive more than five years.

In the case of a specified year, a beneficiary can receive all the funds in his or her RDSP in a lump sum or the funds may be spread over the next five years. Withdrawals from the RDSP will trigger the repayment of the Assistance Holdback Amount (AHA). 

This is provided to beneficiaries who have a shortened life expectancy – 5 years or less. A doctor must certify in writing that the beneficiary has 5 years or less to live and then they make and election to turn the plan into a specified plan. Withdrawals from the SDSP will not trigger the repayment of the AHA as long as the total of the taxable amount of all withdrawals made in the year do not exceed $10,000. If an election is made no new contributions are permitted and no new grants and bonds can be paid into the account and they are not entitled to new carry forward of grants and bonds. 

A maximum amount of $200,000 can be contributed to each beneficiary’s RDSP, and contributions can be made until December 31st of the year the beneficiary turns 59. This is a lifetime limit and is not reset if an RDSP is transferred, or closed and later re-established. There is no annual contribution limit.

Contributions can be made to a plan until the earliest of:

• the beneficiary’s death
• December 31st 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 time when the beneficiary is no longer resident in Canada for tax purposes 

If the holder signs a consent form to allow someone other than the holder to make contributions to the RDSP, Mackenzie will allow PACs and third party cheques. The holder must be aware of the third party contributions in order to ensure that the maximum $200,000 limit is not exceeded, and so that the holder of the plan is able to schedule contributions to maximize government grants.

Contributions are not tax-deductible; however, the earnings grow tax free while held in the plan. There is however, legislation that will allow for a tax-deferred rollover of RRSP/RRIF or Registered Pension Plan monies and government grants and bonds to a disabled financially dependent child or grandchild of a supporting annuitant. As of January 1, 2014 the tax-deferred rollover of the AIP from an RESP is permitted as long as certain criteria are met, this is discussed in more detail in #25. 

Yes, as of July 1, 2011 tax-deferred transfers from RRSPs, RRIFs or RPPs are permitted to an RDSP as long as the beneficiary of the RDSP was financially dependent on the parent or grandparent. The amount transferred cannot exceed the beneficiary’s contribution limit. Contributions under these rules will be taxable to the RDSP beneficiary when withdrawn from the plan. In addition, contributions in these circumstances will not attract any Government grant or bond monies, so can be used as an immediate income stream for the RDSP beneficiary as long as grant/bond has not been received in the 10 years preceding the withdrawal. Please note this rollover must be made directly from the RRSP/RRIF or RPP of the deceased and cannot be done from the estate of the deceased.

Qualified investments for RDSPs are generally the same as those for Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) and include cash, stocks, bonds, GICs, mutual funds and a variety of other investments. A Mackenzie RDSP can hold Mackenzie mutual funds. A full list of eligible funds can be found later in this document.

Effective January 1, 2014, if a beneficiary has an RESP and becomes disabled, the accumulated income from the RESP may be transferred on a tax-deferral into the beneficiary’s RDSP. It is important to note that the rollover is not eligible for the Canada Disability Savings Grant. The contributions in the RESP would be returned to the subscriber tax-free and can be invested in the RDSP. If this happens these contributions would be eligible for Government grants up to the maximum annual grant amount (currently $10,500). When the RESP is collapsed, any grants in the account will need to be paid back to the Government. The AIP rollover is not subject to regular income tax or to the 20% penalty that would normally apply when an AIP is paid to an RESP subscriber. 

The rollover from the RESP will reduce the beneficiary’s RDSP contribution room and will be included as income when withdrawn.

Yes. In-kind transfers of Mackenzie Investments mutual funds from a non-registered Investment Account to an RDSP are allowed. If the transferred mutual funds are Mackenzie Investment funds carrying a back-end schedule, that schedule will be maintained upon transfer to the RDSP. (Note however, that a transfer from a non-registered Investment Account to an RDSP will have income tax consequences as it will be a disposition for tax purposes). 

Yes. Although a beneficiary can have only one RDSP at any given time, transfers from one financial institution to another are permitted. The receiving financial institution can set up the RDSP account to receive the transfer, but the new RDSP will be in “pending” status and unable to request CDSG and CDSB monies. Once the transfer is completed and the original RDSP is closed out, contributions can be made to the newly-established RDSP and qualifying grant and bond monies can be requested.

• For beneficiaries over 18 years of age: 
  • They must file their personal income tax returns for the past two years prior to when the initial contribution is in reference to (for example for 2009 they look at 2007 income; for 2010 they look at 2008 and so forth) plus all future taxation years to qualify for the maximum matching grant. CRA uses the income data of the second preceding year to determine the grant match. This is because CRA has not finished processing the immediately preceding year’s data until the second part of the year. 
• For beneficiaries under 18 years of age:
  • Parents or guardians must file their income tax returns for the two years and all future taxation years, and apply for the Canada Child Benefit to qualify for the maximum matching grant. 

Yes. The annual deadline is December 31 for grant and bond consideration. 

Yes, beginning in 2011, unused grant and bond entitlements can be carried forward for a maximum 10 year period.Yes, beginning in 2011, unused grant and bond entitlements can be carried forward for a maximum 10 year period.

Bond room can carry forward for up to 10 years. You do not have to establish an RDSP to generate Bond room; you just have to have been a resident of Canada who was DTC-eligible and meet the applicable income test for the year in question. At most, a person will generate $1,000 of Bond room in a particular year. The maximum Bond payment in a particular year is $11,000, i.e., $1,000/year * 10 years of carry forward, plus $1,000 maximum entitlement for the current year. Once an RDSP is established for a beneficiary, if the holder applies for the Bond, ESDC will look back to the past 10 years and award all Bonds generated in that period.

Grant room can carry forward for up to 10 years. You do not have to establish an RDSP to generate Grant room; you just have to have been a resident of Canada who was DTC-eligible. At most, a person will generate $3,500 of Grant room in a year. However, the maximum Grant payment in a particular year is $10,500, even though the beneficiary may have accumulated substantially more than $10,500 of Grant room under the 10-year carry forward rules. Contributions to an RDSP will first “use up” the beneficiary’s 300% room, then the 200%, then the 100%. 

No. Only contributions made before the end of the year in which the beneficiary turns age 49 will be eligible for matching CDSG amounts and CDSB amounts. This is because withdrawals (LDAPs) must begin by no later than age 60, which would cause any government monies paid into the RDSP to be clawed back by the Government due to the 10-year AHA rules. 

The lump sum of $200,000 would be eligible for one annual CDSG amount based on the initial $1,500 of the contribution. The lump sum will only attract this amount in the year the contribution is made. There would be no further CDSG monies that can be claimed in future years. If the beneficiary has Canada Disability Savings Grant (CDSG) carry forward available to them the maximum they would receive in grant based on a $200,000 contribution is $10,500. 

RDSP withdrawals are made up of contributions, growth, grants and bonds. Contributions are generally not taxable, while income growth, grants and bonds are taxable in the hands of the beneficiary. Contributions are taxable if the source of the contribution was a rollover of RRSP/RRIF or RPP monies of a deceased supporting parent or grandparent or a rollover from the AIP from an RESP. 

When the RDSP was first launched and a withdrawal of any amount was made, all federal grants and bonds paid into the RDSP in the previous 10 years had to be repaid to the federal government. This is known as the Assistance Holdback Amount (“AHA”). The purpose of the AHA is to ensure that RDSPs are used for long-term savings, and also to ensure that government funds contributed are not withdrawn and used as leverage for matching grants in future years. As of January 1, 2014 instead of having to repay all of the Government grants and bonds that were contributed to the account over the last 10 years, the ratio will be $3 of Government grants and bonds for every $1 withdrawn from the account. This is good news because it results in less financial hardship for RDSP beneficiaries who require financial assistance from time to time from their RDSPs.

Only the amounts paid by the government must be repaid – growth will be retained in the RDSP for the beneficiary to use. 

The Lifetime Disability Assistance Payment (LDAP) must begin by December 31st of the year the beneficiary turns 60 and the annual minimum withdrawal must be at least equal to the amount of the LDAP formula.

The maximum annual limit for total withdrawals (combined DAP and LDAP) from Primarily Government Assisted Plans (PGAP) – this is where there is more government contributions in the plan than private contributions – PGAPs is the greater of the amount determined by the LDAP formula and 10% of the fair market value of the account at the beginning of the year.

No. Payments from an RDSP do not impact other income-tested federal government programs, including:

• Old Age Security (OAS)
• Guaranteed Income Supplement (GIS)
• Canada Pension Plan (CPP)
• The Goods and Services Tax Benefit (GST Benefit)
• Social assistance benefits

In addition, all of the provinces have now generally agreed that provincial benefits will not be affected by RDSP income, although some provinces have a maximum income level test.

Upon death of the RDSP beneficiary, the RDSP must be collapsed by December 31st of the following year. Grant and bond money that has been paid into the RDSP in the previous 10 years will be repaid to the government. Growth, grants and bonds are taxable in the beneficiary’s estate. Initial contributions are tax-free. Proceeds from the collapsed RDSP will be distributed in accordance with the beneficiary’s will or, if the beneficiary doesn’t have a will, in accordance with the rules of intestacy in each province.

In cases where the holder is someone other than the beneficiary and the holder dies, control of the RDSP would normally pass to the holder’s executor until either a qualified family or legal guardian of the beneficiary is added to the account. In the case of a joint holder scenario, control would pass to the surviving joint holder. 

Prior to Budget 2019 If an RDSP beneficiary is no longer eligible for the Disability Tax Credit (DTC), the RDSP account had to be closed by December 31 of the following year. Any grants and bonds in the account had to be repaid to the Government and are lost forever.

Budget 2019 proposed to eliminate the requirement to close the RDSP account when someone loses the DTC. This will help retain grants and bonds in the account that under the previous rules needed to be repaid to the government. The RDSP account can remain open, but no new contributions can be made to the plan and it is not eligible for grant and bond or carry forward of grant and bond. 

In cases where the holder is someone other than the beneficiary and the holder becomes incapacitated, the Power of Attorney for the holder would assume control of the RDSP