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Home  ->  Financial Planning  ->  Disabilities ->  Registered Savings Plans  ->  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.

Death of the Beneficiary of the RDSP

An RDSP will be terminated if the beneficiary dies.  All amounts remaining in the plan must be paid out to the beneficiary's estate by December 31st of the calendar year following the year of death.  The taxable portion of any disability assistance payment made will be included in the income of the beneficiary's estate in the tax year in which the payment is made.

Loss of Disability Tax Credit Eligibility

Since 2021, an RDSP holder has the option of keeping the plan open if the beneficiary is no longer eligible for the Disability Tax Credit, or they can close the plan.

Withdrawals can still be made from the plan if it is kept open, but no contributions can be made, nor can grants or bonds be paid.  Rollovers to the plan from a deceased parent or grandparent's registered account must be done within a limited number of years.

Non-Compliance With RDSP Terms and Conditions

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.

See Taxation of Disability Assistance Payments.

The 2019 Federal Budget made 2 changes to RDSPs:

bullet eliminated 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.
bulletexempts RDSPs from seizure in bankruptcy, with the exception of contributions made in the 12 months before the filing.

Canada Revenue Agency (CRA) Resources

If you lose Disability Tax Credit approval

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

Back to: RDSP main page

Revised: October 26, 2023


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