Canada RDSP Guide (Registered Disability Savings Plan)

the Registered Disability Savings Plan (RDSP) in Canada. The RDSP is a tax-sheltered savings plan designed to help the Canadians with disabilities (the beneficiaries who qualify for the Disability Tax Credit) and their families to save for the long-term financial security. The lifetime contribution limit is $200,000 (no annual limit). The contributions are not tax-deductible (like the RESP and the TFSA). The investment growth is tax-deferred. The key benefit is the government grants and bonds: the Canada Disability Savings Grant (CDSG) matches the contributions at the rates of 100%, 200%, or 300% based on the family income (up to $3,500 per year, $70,000 lifetime), and the Canada Disability Savings Bond (CDSB) provides up to $1,000 per year ($20,000 lifetime) for the low-income families without any contributions. The Disability Tax Credit (DTC) certification is required for the beneficiary to open the RDSP. The RDSP must be opened by the legal parent or the guardian (the "holder") for the child or the adult who cannot manage the financial affairs independently. The RDSP matures when the beneficiary reaches age 60 (the grants and the bonds stop at age 49). The RDSP terminates at the end of the year the beneficiary turns 60 (or earlier, if the beneficiary dies or the RDSP is closed). The Lifetime Disability Assistance (LDAP) withdrawals are required from age 60 (the minimum annual payment of the fair market value divided by the beneficiary's remaining life expectancy).

Contribution Rules

Lifetime limit: $200,000 per beneficiary. The contributions cannot exceed $200,000 (the cumulative limit applies). The overcontribution above $200,000 incurs the penalty of 1% per month on the excess.
No annual limit: The RDSP does not have an annual contribution limit (unlike the RRSP and the TFSA). The subscriber can contribute up to $200,000 at once (if the financial capacity allows).
Beneficiary age: The beneficiary must be a Canadian resident (with the DTC certification) under age 60. The RDSP can be opened at any age from birth to age 59 (the grants and the bonds are available until December 31 of the year the beneficiary turns 49).
DTC certification: The beneficiary must be approved for the Disability Tax Credit (DTC) — the CRA Form T2201 must be completed by the medical practitioner and approved by the CRA. The DTC is the prerequisite for the RDSP (the RDSP cannot be opened without the DTC approval).
Holder: The holder (the person who opens the RDSP) must have the legal authority to act for the beneficiary. For the minor beneficiaries, the parent or the legal guardian is the holder. For the adult beneficiaries who are unable to manage the financial affairs, the guardian or the attorney (the Power of Attorney) must be appointed.
RDSP issuer: The RDSP is offered by the banks, the credit unions, the trust companies, and the investment dealers (the "qualified issuers"). The beneficiary (or the holder on behalf of the beneficiary) chooses the investments (the stocks, the ETFs, the GICs, the bonds, the mutual funds).

Government Grants & Bonds

Canada Disability Savings Grant (CDSG): The CDSG matches the first $500 contributed at 300% (up to $1,500) and the next $1,000 contributed at 200% (up to $2,000), for a total of up to $3,500 per year in the grants (on the contributions of $1,500). The lifetime maximum grant is $70,000. The matching rates depend on the family income (the "income threshold" — the adjusted family income). The grant room can be carried forward (unused grant room from the prior 10 years can be used to earn the grants).
Canada Disability Savings Bond (CDSB): The CDSB provides up to $1,000 per year for the low-income families (the adjusted family income below $33,849 for the single beneficiary or $55,867 for the 2-parent family, indexed). The CDSB does not require any contributions. The lifetime maximum bond is $20,000. The bond room (the unused bond room from the prior 10 years) can be carried forward.
Grant and bond repayment: If the RDSP is terminated (the beneficiary dies or the plan is closed), the total grants and bonds paid to the RDSP must be repaid to the Government of Canada (the "assistance holdback amount"). The repayment is the first claim on the RDSP assets (the contributions are returned to the beneficiary or the estate).
10-year carry-forward: The CDSG and the CDSB have the 10-year carry-forward (the unused grant/bond room from the prior 10 years can be used to earn the future grants/bonds). For example, if the beneficiary did not contribute in 2015-2025, the unused room from 2015-2025 can be used in 2026 (subject to the annual limits).

Withdrawals & Plan Maturity

Lifetime Disability Assistance Payments (LDAPs): The minimum annual withdrawal from the RDSP starting at age 60. The LDAP is calculated as the fair market value of the RDSP assets divided by the beneficiary's remaining life expectancy (as per the CRA mortality tables). The LDAPs are taxed in the beneficiary's hands at the marginal rate.
Disability Assistance Payments (DAPs): The withdrawals before age 60 (the "disability assistance payments"). The DAPs are taxed in the beneficiary's hands. The DAPs trigger the repayment of the grants and the bonds in proportion to the withdrawal amount (the $3-for-$1 rule — for every $1 withdrawn, $3 of the grants and the bonds must be repaid, up to the total assistance holdback amount).
Withdrawal order: The RDSP withdrawals are treated as the "first-in, first-out" (FIFO) for the tax purposes. The contributions (the "taxable portion" of the DAP) are the contributions withdrawn first (tax-free). The grants, the bonds, and the investment income (the "assistance holdback" portion) are the subsequent withdrawals (taxable).
Beneficiary death: Upon the beneficiary's death, the RDSP terminates. The grants and the bonds are repaid to the Government of Canada. The remaining assets (the contributions and the investment income, after the repayment of the grants/bonds) are distributed to the estate or the beneficiaries (taxed as the income of the deceased beneficiary on the final return).

For the Disability Tax Credit (DTC) requirements and the application process, see our Disability Tax Credit Guide →. For the RESP and the education savings rules, see our RESP Guide →.