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RDSP Termination

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Financial Planning  ->  Disabilities -> RDSPs -> Termination of an RDSP

Termination of a Registered Disability Savings Plan (RDSP)

When a registered disability savings plan (RDSP) is terminated, any amounts remaining in the plan, after any required repayments of CDSG and/or CDSB, are to be paid to the beneficiary or the beneficiary's estate by the end of the following year.

An RDSP will be terminated if

bulletthe beneficiary dies, or
bulletthe beneficiary ceases to have, for at least a full calendar year, the severe and prolonged impairments which resulted in eligibility for the disability tax credit (DTC).

The RDSP may be de-registered if it ceases to qualify for status as an RDSP because it does not comply with all the terms and conditions that were put in place when the plan was set up, or if it does not comply with rules in the Income Tax Act.  This will result in a deemed disability assistance payment equal to

bulletthe fair market value of the plan, less
bulletthe assistance holdback amount

The assistance holdback amount must be repaid to the government when the RDSP is terminated or de-registered.  The rule for this is in the Canada Disability Savings Act Regulations.

The 2019 Federal Budget proposes to make 2 changes to RDSPs:

    - eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC.  This would allow grants and bonds otherwise repaid to remain in the RDSP. Some restrictions on access to these amounts would apply.

    - exempt RDSPs from seizure in bankruptcy, with the exception of contributions made in the 12 months before the filing.

Next:  Rollovers to an RDSP from the RRSP/RRIF or RPP of a deceased person

Back to RDSP main page

Revised: April 20, 2019

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