A few years ago, my aunt and uncle set up a registered disability savings plan for my cousin, Paul, who has Down syndrome. It was a smart move.
I think RDSPs are too often overlooked. While many of us are thinking about RRSPs today, consider whether an RDSP should be set up for someone close to you.
The why
An RDSP is a long-term savings plan, similar to an RRSP, that is designed to help save for the future of someone with a disability. The good news? There are no restrictions on how the funds in the plan must be used.
A beneficiary might consider using RDSP funds to help cover daily costs of living, medical or dental costs not covered by provincial or private health insurance, unexpected emergencies, or to provide financial security in retirement.
The plan can also be put toward disability costs such as modifying their home for accessibility, purchasing or adapting vehicles for accessibility, or hiring a personal care or support worker.
The funds can even be used to support continuing education or training, or participation in hobbies such as sports or travel.
The rules
An RDSP is established by someone known as the plan holder – often a parent or guardian while the beneficiary is a minor. A person can also set up an RDSP for themselves once they’re 18 if they’re contractually competent. The beneficiary of the RDSP can contribute to their own plan, or anyone else can contribute as long as the plan holder approves. There are no annual contribution limits, but the maximum that can be contributed is $200,000 in the lifetime of the beneficiary.
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Contributions are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. A huge benefit of RDSPs is that the government will contribute to the plan as well, in two potential ways: the Canada disability savings grant, and the Canada disability savings bond.
The CDSG is paid into the plan and will match your contributions to the tune of 100, 200 or 300 per cent – depending on the beneficiary’s adjusted family income. For example, the government will pay grants of $3 for each $1 contributed for the first $500 of contributions (if your adjusted family income is under $114,750 in 2025), and $2 for every $1 contributed on the next $1,000 of contributions. A maximum CDSG of $3,500 in any year, or $70,000 in the lifetime of the beneficiary, can be paid into an RDSP, and grants can be paid until the end of the year in which the beneficiary turns 49. Go to www.canada.ca and type RDSP in the search field for details on grant amounts.
The CDSB is interesting because the money will be paid into the plan even if no contributions are made by others. The government will pay a bond of up to $1,000 each year to the RDSP of low-income Canadians with disabilities, with a lifetime limit of $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49. Again, the amount of the bond is based on the beneficiary’s adjusted family net income. For income under $37,487 (in 2025), the full $1,000 bond will be paid into the RDSP. For incomes between $37,487 and $57,375, the bond amount is reduced based on a formula. Above $57,375 and no CDSB is available.
The beneficiary can withdraw, tax-free, the amounts contributed to the RDSP, although the CDSG, CDSB, any income earned in the plan over the years, along with any rollovers made into the plan (from an RRSP, for example), are included in the beneficiary’s income when withdrawn.
The nuances
The beneficiary must qualify for the disability tax credit to be entitled to have an RDSP. So, file Form T2201, Disability Tax Credit Certificate, with the taxman before opening a plan.
It’s also good to know that the plan holder doesn’t have to be a resident of Canada, although the beneficiary must be a resident when the plan is opened and when each contribution is made.
Finally, payments out of an RDSP can only be made to the beneficiary (or to the beneficiary’s estate after their death). If you’re the contributor, sorry, you won’t be entitled to a refund of your contributions.
Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. He can be reached at tim@ourfamilyoffice.ca.
