Section 146.4

For a registered disability savings plan (“RDSP”) that is a primarily government assisted plan (“PGAP”), i.e., government contributions exceed plan holder contributions, annual withdrawals are limited to 10% of the value in the RDSP at the beginning of the year – except that CRA has indicated that it may permit withdrawal requests above that limit in circumstances of financial hardship where it is just and equitable to do so.

(a) Could CRA set out its guidelines in this regard?

CRA referred to three of its guidelines.

1. Whether the RDSP beneficiary would suffer significant hardship, loss or disadvantage from a refused waiver, e.g., failure to meet the basic necessities of life, or harm to health.
2. Whether the granting of the waiver would negatively impact the financial viability of the trust, e.g., referencing impact on family members or caregivers who rely on the trust’s integrity for planning and support.
3. Whether the granting of the waiver is consistent with the legislative intent; for example, the RDSP program is not intended to help anyone other than the beneficiary.

CRA is working on creating a form for RDSP waiver requests for issuers to fill out and is anticipating having this form posted to its website in 2026.

(b) What is the reason for the CRA requirement that the plan holder must also be the plan beneficiary?

Currently, most waiver requests received, where the holder and beneficiary are not the same individual, are clearly requests to help plan holders who are having financial hardship issues themselves, and not the RDSP beneficiary.

However, where the holder and the beneficiary are not the same individual, and the RDSP issuer nonetheless is of the view that the beneficiary is experiencing financial hardship and that a waiver is in the beneficiary's best interests, the issuer is welcome to send a waiver request to CRA explaining why the request warrants an exception to this guideline.

The beneficiary of an RDSP had Down syndrome and a life expectancy of 60 years. Would the rules regarding withdrawal of funds limit the utility of the RDSP for such a beneficiary. Also, how would ss. 146.4(4)(l), (m), and (n) apply, and could the RDSP be voluntarily terminated during the beneficiary's lifetime?

CRA noted that 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) was 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 beneficiary had a life expectancy of 60 years, the beneficiary would likely only receive [annually] a fraction of the RDSP's property. Beginning LDAPs prior to age 60 would allow the beneficiary to receive a larger portion of the RDSP's property.

CRA noted that where the plan permits 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 the issuer to terminate the RDSP during the lifetime of the beneficiary if the beneficiary was no longer eligible for the disability tax credit or if the only property in the plan was the assistance holdback amount (AHA). 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. (S. 146.4(4)(p) only describes situations when an RDSP must be terminated, and does not stipulate that a plan cannot be terminated in other circumstances.)

The excess amount could be withdrawn through the payment of a non-LDAP, assuming the plan allowed for such payments. If the plan did not permit non-LDAPs, the holder could consider transferring the property (on a tax-deferred basis, if the s.146.4(8) conditions were satisfied) to a financial institution offering terms allowing for non-LDAPs.

Additional considerations applied under an RDSP that was primarily government-assisted, as discussed by CRA in relation principally to s. 146.4(4)(n).

In the context of a discussion of 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 noted that in a situation where an RDSP is a primarily government-assisted plan (that is, where the total of all amounts paid under the Canada Disability Savings Act to an RDSP is greater than the private contributions made to the RDSP) (a “PGAP”), s. 146.4(4)(n) restricts the total disability assistance payments (DAPs) that can be paid in a calendar year. This restriction will limit the DAPs that are not lifetime disability assistance payments (LDAPs) that can be paid from a PGAP. However, CRA stated:

[I]n circumstances of severe financial hardship, the CRA has taken an administrative position that an exception to this restriction can be requested by the holder of a PGAP. This request must be submitted via a formal request to the PGAP issuer who will forward or submit the request to the Registered Plans Directorate of CRA.

CRA went on to discuss the requirements of ss. 146.4(4)(n)(i) and (ii) in detail.

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.) (S. 146.4(4)(p) only describes situations when an RDSP must be terminated, and does not stipulate that a plan cannot be terminated in other circumstances.)
• Additional considerations applied under an RDSP that was primarily government-assisted, as discussed by CRA in relation principally to s. 146.4(4)(n).