A Brief Discussion: Registered Disability Savings Plan (RDSP)

by Geoff Sgarbossa, CD, CFP, RIS, Financial Planner, Keill & Associate- Advisory Team

People with Disabilities and their loved ones face a distinct set of financial challenges throughout their lives. To help address these challenges, in 2008 the government of Canada introduced the Registered Disability Savings Plan (RDSP). Designed to help build long-term financial security for disabled persons, the RDSP makes it easier to accumulate funds by providing assisted savings and tax- deferred investment growth. The RDSP is a big step forward in the journey to end poverty for people with disabilities. On it’s own it offers people with disabilities a chance to accumulate savings and to use them without fear of claw backs by other government income and disability assistance programs.

How the Government Program Helps

The federal government helps in the form of Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs). The beneficiary is eligible for CDSGs and CDSBs until December 31st of the year the beneficiary turns 49.

Canada Disability Saving Grant

The CDSG is a matching grant. That means that you need to make contributions, and the government also pays into your RDSP to help you save. The Government gives matching grants of up to 300 percent, depending on the beneficiary’s family income and contributions.

Canada Disability Savings Bond

The CDSB is money the Government contributes to the RDSPs of low and modest-income Canadians. Bonds are paid into the RDSP if an application has been made on or before December 31st of the year the beneficiary turns 49 years of age. You do not need to make any contributions to your RDSP to receive the Bond.

Who is Eligible for an RDSP?

To qualify for an RDSP, you must:

• Be eligible for the Disability Tax Credit

• Be a resident of Canada with a valid Social Insurance Number (SIN)

• Be less than 60 years of age

Contributions and Limitations

Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. There is no annual limit on amounts that can be contributed to an RDSP; however, the overall lifetime limit for a particular beneficiary is $200,000.

5 Ways to contribute

• Contributions by the account holder.

• Contributions by people the account holder has authorized.

• Federal grants and bonds.

• Transfers from a qualified RRSP,RRIF or RPP.

• Transfers of the accumulated income from a Registered Education Savings Plane (RESP if it names the same beneficiary as the RDSP).

CDSB

Grant amounts are income tested and adjusted for inflation annually.

If your family income is less than or equal to $114,750 (2025):

For the first $500 you contribute each year to the RSDP, the Government will deposit $3 for every $1 you contribute, up to $1,500 each year

For the next $1000 you contribute each year to the RDSP, the Government will deposit $2 for every $1 you contribute, up to an additional $2,000 a year.

If your family income is greater than $114,750 (2025):

For the first $1,000 you contribute each year to the RDSP, the Government will deposit $1 for every $1 you contribute, up to $1,000 a year.

The maximum Grant is $3,500 per year, with a lifetime limit of $70,000. Matching grants are paid into the RDSP on contributions that are made up to and including December 31st of the year you turn 49 years of age.

CDSB

Bond Eligibility is income tested and adjusted for inflation annually.

If the beneficiary’s family net income is less than or equal to $37,487

(2025):

• The government deposits $1,000 each year to the RDSP.

If the beneficiary’s family net income is between $37,487 and $57,375

(2025):

• The government deposits a portion of $1,000 to an RDSP each year. As the family net income increases, the Bond amount paid into the RDSP decreases, completely disappearing at $57,375 (2025).

If you qualify for the Bond, you can receive you to $1,000 a year, with a lifetime limit of $20,000.

Unused Grant and Bond entitlements: "The Carry- Forward Measure"

If you received the DTC in previous years but waited to open your RDSP or, contributed less than the maximum amount, you can receive those unused Grants and Bond entitlements in future years. To receive unused Grant and Bond entitlements, you must have qualified to receive the Grant and the Bond in previous years. You can apply until December 31st of the year you turn 49. Grants and Bonds will be paid on unused entitlements, up to an annual maximum of:

• $10,500 (2025) for CDSGs, and

• $11,000 for CDSBs

Accessing your Money

There are two types of withdrawals from an RDSP. Both can be used for disability or non- disability related expenses.

1. Lifetime Disability Assistance Payments (LDAPs).

• Recurring annual payments, once started, must be paid until the plan is terminated or the beneficiary has died.

• May begin at any age but must commence by the end of the year in which the beneficiary turns 60.

• Payments are generally limited to a maximum based on the fair market value of the plan and the beneficiary’s life expectancy (age 80 in most cases). The maximum amount doesn’t apply when a physician certifies that the beneficiary isn’t expected to survive beyond five years.

2. Disability Assistance Payments (DAPs)

• Lump sum payments made to the beneficiary or the beneficiary’s estate.

• May only be made if the plan’s fair market value after payment will be more than the Assistance Holdback Amount that would apply on CDSGs and CDSBs received in the 10 years prior to the DAP.

Beware of early withdrawals! Before withdrawing funds, you should be aware of the 10- year rule. If your RDSP received any CDSGs or CDSBs in the 10 years prior to the withdrawal, the Assistance Holdback Amount (AHA) will apply; for every $1 withdrawn, $3 worth of CDSGs and/ or CDSBs must be repaid to the government. The reason for the AHA is because RDSPs are intended for long-term savings. The AHA ensures that government funds aren’t withdrawn and re-contributed to gain additional matching grants in future years. The rule also applies to grants and bonds received in the 10-year period before the beneficiary’s death or the cessation of their disability. Grants and bonds received more than 10 years prior don’t have to be repaid. Because of the repayment provisions, your RDSP may not be a good option for short-term expenses.

Summary

The RDSP is a fantastic tool to help those living with disabilities plan for their future. However, while the government contributions can be quite attractive, this account may not be for everyone. Other planning tools used by our Team remain important components of a complete financial plan for those living with disabilities.

Disclaimer and Notice to Reader: This Discussion Paper should not be construed as legal or tax advice but rather only as a general statement and explanation of the topic matter. Professional tax and legal advice should be obtained for the readers own personal situation. For more information on this topic or how it applies to your family, please contact our Wealth Advisory team.

Last Edit August 27, 2025