ARCHIVED – Registered Disability Savings Plans (RDSP) - Beneficiaries with Shortened Life Expectancies

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1. What are the current rules in respect of disability assistance payments (DAPs) from an RDSP in respect of the repayment of Canada Disability Savings Grants and Canada Disability Savings Bonds?
2. What is changing in respect of these payments?
3. How can plan holders and beneficiaries take advantage of this measure?
4. What rules apply to an SDSP?
5. When do these new rules apply?
6. Can the election be reversed?
7. If an election is reversed, can the plan holder elect again if circumstances change?
8. What happens if a plan fails to comply with any of the conditions that apply to an SDSP?
9. What happens if an RDSP that is an SDSP is terminated or deregistered?
10. Where can I find more information on this budget measure as well as on RDSPs?

1. What are the current rules in respect of disability assistance payments (DAPs) from an RDSP in respect of the repayment of Canada Disability Savings Grants and Canada Disability Savings Bonds?

If a DAP is made to a beneficiary of an RDSP, the RDSP rules require that all grants and bonds paid into the RDSP in the preceding 10 years be repaid to the government.

2. What is changing in respect of these payments?

Where a beneficiary has a shortened life expectancy, the budget proposes that a repayment of grants and bonds will not be required if a DAP up to a specified limit is made to the beneficiary.

3. How can plan holders and beneficiaries take advantage of this measure?

The plan holder must make an election in prescribed form to take advantage of this measure. The plan holder must file the prescribed form along with a letter from a medical doctor certifying that the beneficiary is not likely to survive more than five years, with the RDSP issuer (generally financial institutions are the issuers of RDSPs). The RDSP issuer must then notify the Minister of Human Resources and Skills Development. Once the election has been made, the RDSP will be considered a Specified Disability Savings Plan (SDSP).

4. What rules apply to an SDSP?

As an SDSP, the following rules apply:

• lifetime disability assistance payments must begin in the year following the year the plan became an SDSP;
• the maximum amount of taxable DAPs that can be withdrawn from the plan each year is $10,000, or such greater amount as would be required to satisfy the minimum withdrawal requirements that ordinarily apply in the year if the beneficiary had attained 60 years of age;
• no further contributions can be made into the plan, except that the rollover of a deceased individual's RRSP or a RRIF proceeds to the SDSP of a financially dependent infirm child or grandchild under existing rules will still be permitted;
• no new grants and bonds will be paid into the plan; and
• no carry forward of unused entitlements to grants and bonds will be permitted, except for the year in which the election is made.

5. When do these new rules apply?

These new rules apply to DAPs made after the legislation receives Royal Assent [Footnote 1]. However, any portion of the $10,000 limit that was not used in 2011 can be used in 2012 provided that the required medical certification was obtained before 2012.

6. Can the election be reversed?

A plan holder will be permitted to reverse an election on a prospective basis. The reversal notice must be submitted in prescribed form to the RDSP issuer who, in turn, must notify the Minister of Human Resources and Skills Development. Following the reversal, the regular RDSP rules will apply except the plan will not be eligible to receive grants and bonds until the following year.

7. If an election is reversed, can the plan holder elect again if circumstances change?

Yes. A plan holder will be permitted to make a subsequent election provided that it is made 24 months after the reversal of the most recent election.

8. What happens if a plan fails to comply with any of the conditions that apply to an SDSP?

If a plan fails to comply with any of the conditions provided in Question 4, the plan will lose its SDSP status and the plan will be subject to the regular RDSP rules. This may require the repayment of grants and bonds.

The Minister of National Revenue will have the discretion to waive the application of these conditions, as well as the 24-month waiting period for subsequent SDSP elections, if it is just and equitable to do so.

9. What happens if an RDSP that is an SDSP is terminated or deregistered?

The regular RDSP rules will apply and may require the repayment of grants and bonds.

10. Where can I find more information on this budget measure as well as on RDSPs?

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web pages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada's Budget 2011 documents for details.

Go to Registered disability savings plan for additional information on RDSPs.

[Footnote 1]

This measure received Royal Assent on June 26, 2011 as part of Bill C-3.

Date modified:

2015-07-15