CRA indicates that limitations on withdrawals from a privately-funded RDSP may potentially be overcome through requesting a lump-sum withdrawal

Regarding how withdrawal limitations under the s. 146.4 rules might apply where the beneficiary of an RDSP had Down syndrome and a life expectancy of 60 years, CRA indicated:

• Lifetime disability assistance payments (LDAPs), as defined in s. 146.4(1), are required by s. 146.4(4)(k) to begin no later than the end of the taxation year in which the beneficiary turns 60. Furthermore, the effect of the formula in s. 146.4(4)(l) is to ensure that the RDSP's property is not exhausted before the beneficiary reaches the age of 80 (and that it will be mostly, but not completely, depleted via LDAPs at that age).
• Where the plan permitted disability assistance payments (DAPs) that were not LDAPs (“non-LDAPs”), such payments could be requested for various reasons, including where the beneficiary was in financial distress.
• Additionally, the holder of the RDSP could request that the issuer terminate the RDSP if the only property in the plan was the assistance holdback amount (AHA); and conversely, if the FMV of the property held in the RDSP exceeded the AHA, the RDSP could not be terminated until this excess was fully eliminated.
• However, this excess amount could be withdrawn through the payment of a non-LDAP, assuming the plan allowed for such payments (and if the plan did not permit non-LDAPs, the holder could consider transferring the property - on a tax-deferred basis, if s.146.4(8) was satisfied - to a financial institution offering terms allowing for non-LDAPs.)
• Additional considerations applied under an RDSP that was primarily government-assisted.

Neal Armstrong. Summaries of 2 December 2024 External T.I. 2023-0973581E5 under s. 146.4(4)(l) and s. 146.4(4)(n).