A Registered Disability Savings Plan (RDSP) is a savings plan, registered with the Canada Revenue Agency (CRA), that helps create long-term savings for people eligible for the Disability Tax Credit.
You can work with a registered investment advisor to decide if an RDSP is right for you.
Opening an RDSP
You can open an RDSP at most financial institutions in Canada.
Before you open an RDSP, identify both the beneficiary and the holder of the plan. In British Columbia, holders must be at least 19 years old. While the holder and beneficiary are often the same person, beneficiaries who are younger than 19 or not contractually competent will need a family member as a holder.
As with any savings or investment account, ensure you understand how your registered investment advisor is compensated and the fees and charges that apply to you. Be sure to:
- Check to see what types of investments you can purchase through the account and your advisor.
- Ask questions about the different types of charges and fees related to the investment you purchase in your account.
- Shop around to compare fees and other charges at other firms.
Contributing to an RDSP
There is no annual contribution limit for an RDSP, but there is a lifetime limit. You may continue to deposit money into an RDSP until the beneficiary turns 60.
These savings plans typically hold Canada disability savings grants and bonds, which are only available to disabled persons, as well as other investment products. It’s a good idea to speak with an investment advisor to make sure you understand how the grant and bond could affect your RDSP contributions.
While the RDSP is a long-term savings plan, funds are usually eligible for withdrawal after 10 years. Beneficiaries must start receiving minimum annual payments at age 60.
You should consult with your advisor or accountant before making any decisions as there may be tax or repayment implications when withdrawing money from an RDSP.
Closing an RDSP
RDSPs must be terminated and all amounts paid out by December 31 of the year following the first calendar year the beneficiary did not qualify for the Disability Tax Credit.
You can postpone the closure of an RDSP if a beneficiary may be eligible for the credit again in the future. An investment advisor can help you determine if it makes sense to apply to postpone the closure of your account.
If a beneficiary dies, the RDSP must be closed and all amounts paid out by a certain date. Your investment advisor and the CRA can help you manage the closure of an RDSP.