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Rollover of RRSP, RRIF or RPP to a Registered Disability Savings Plan (RDSP)

Income Tax Act s. 60.02

Budget 2010 revised the Income Tax Act to allow a tax-deferred rollover of a deceased individual's RRSP/RRIF or RPP proceeds to the Registered Disability Savings Plan (RDSP) of a financially dependent infirm child or grandchild. This was effective for deaths occurring on or after March 4, 2010. The actual transfer to the RDSP, however, could not be made until after June 2011.

Previously, the proceeds could only be received on a tax-deferred basis by a financially dependent infirm child or grandchild under 18 years of age by a transfer to the RRSP, RRIF or eligible annuity of the child or grandchild.

The Sustaining Canada's Economic Recovery Act, Bill C-47, was introduced in the House of Commons on September 30, 2010, including the legislation for the rollover to RDSPs, and received Royal Assent (became law) on December 15, 2010.

Who is Eligible?

An eligible individual:

is a child or grandchild of a

	deceased RRSP or RRIF annuitant, or
	deceased RPP member

was financially dependent on the deceased, at the time of the deceased's death, by reason of infirmity of the dependent.

What Proceeds are Eligible?

Eligible proceeds means any of

	a refund of premiums from an RRSP
	an eligible amount paid from a RRIF, or
	a lump sump payment (other than from actuarial surplus) from an RPP

that is received by an eligible individual as a result of the death, after March 3, 2010, of a parent or grandparent of the eligible individual.

Specified RDSP Payment

A specified RDSP payment:

	is an amount paid after June 2011 to an RDSP under which an eligible individual is the beneficiary
	must be designated as a specified RDSP payment by the eligible individual

	*will be included in the income of the recipient* on withdrawal from the RDSP
	complies with the following RDSP contribution conditions:

contributions may not be made to the RDSP in any year in which the beneficiary is not eligible for the disability amount tax credit, or after the death of the beneficiary

	contributions may not be made if the beneficiary is not a resident of Canada
	contributions may not be made after the end of the year in which the beneficiary turns 59
	the payment cannot exceed contribution room remaining in the RDSP (maximum lifetime limit of $200,000)
	the holder of the plan must provide written consent for the contribution

RDSP Beneficiary Loses DTC Eligibility

If an RDSP is kept open after the beneficiary is no longer eligible for the Disability Tax Credit (DTC), amounts from a deceased parent or grandparent's registered plan can only be rolled over to the RDSP if the payment is made by the end of the fourth taxation year following the first taxation year throughout which the beneficiary is not a DTC-eligible individual.

If the beneficiary lost their DTC eligibility in 2019, then 2020 is the first taxation year throughout which the beneficiary is not a DTC-eligible individual. This means the rollover would have to be done by the end of 2024.

Transitional Eligible Proceeds

Where the death of the RRSP or RRIF annuitant or RPP member occurred after 2007 and before 2011, transitional rules applied that recognize that individual estate plans may not have been amended to reflect the new rules.

Transitional eligible proceeds include an amount received as a result of the death after 2007 and before 2011 that is:

	any of a refund of premiums from an RRSP, an eligible amount paid from a RRIF or a lump sum payment (other than an amount of actuarial surplus) from an RPP; or
	any amount that had been rolled-over under s. 60(l) of the Income Tax Act to the taxpayer's RRSP or RRIF (i.e., the taxpayer claimed a 60(l) deduction for the amount), and which is subsequently withdrawn from the RRSP or RRIF in order to make a "specified RDSP payment".

These transitional rules applied where the deceased individual may have provided a bequest directly to the eligible individual, to the spouse or common-law partner of the deceased, or to another beneficiary. These rules allowed this beneficiary to contribute to the RDSP of an eligible individual. If the bequest had been included in the income of a taxpayer, for instance the recipient or the deceased, then a deduction would be allowed for the contribution of the transitional eligible proceeds to the RDSP.

Where the death occurred after 2007 and before 2011, the contribution to the RDSP had to be made before 2012.

See also Canada Revenue Agency RDSP Limits, Transfers and Rollovers.

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Revised: October 26, 2023