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Registered Disability Savings Plan (RDSP)
A registered disability savings plan (RDSP) is a savings plan that is intended to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit. (see Ontario Disability Tax Credit Certificate at the beginning of this section).
Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59 years of age to a lifetime maximum of $200,000. Contributions that are withdrawn are not to be included as income for the beneficiary when paid out of an RDSP. Contributions may qualify for payments from the Canada Disability Savings Grant (CDSG) program, up to a lifetime maximum of $70,000.00 per beneficiary. However, the Canada disability savings grant, Canada disability savings bond and investment income earned in the plan are included in the beneficiary’s income for tax purposes when paid out of the RDSP.
Who can become a beneficiary of an RDSP?
You will be able to designate an individual as beneficiary if the individual:
- is eligible for the disability amount;
- has a valid social insurance number (SIN);
- is a resident in Canada at the time the plan is entered into; and
- is under the age of 60. (This age limit is not applicable when a beneficiary’s RDSP is opened as a result of a transfer from the beneficiary’s prior RDSP)
A beneficiary can only have one RDSP at any given time, although this RDSP may have several plan holders throughout its existence, and it can have more than one plan holder at any given time.
Who can contribute to the RDSP?
Anyone can contribute to an RDSP with the written permission of the plan holder.
Who can open an RDSP?
To open an RDSP, a person who qualifies to be a holder of the plan must contact a participating issuer that offers RDSPs. Generally, financial institutions are the issuers of RDSPs.
If the beneficiary has reached the age of majority and is legally able to enter into a contract, then a disability savings plan can be established for such a beneficiary by the beneficiary and/or the legal parent who is, at the time the plan is established, a holder of a pre-existing RDSP of the beneficiary.
If the beneficiary is a minor, another person can open an RDSP for the minor and become a holder if that person is:
- a legal parent of the beneficiary;
- a guardian, tutor, or curator of the beneficiary, or an individual who is legally authorized to act for the beneficiary; or
- a public department, agency, or institution that is legally authorized to act for the beneficiary.
For the most current information about RDSPs, please visit the Canada Revenue Agency website: www.cra-arc.gc.ca