Take money out of a registered disability savings plan
Types of payments a beneficiary can receive
A registered disability savings plan (RDSP) beneficiary can receive 2 types of payments from their RDSP:
- Disability assistance payment – a lump sum payment that is only allowed if it is permitted by the RDSP declaration of trust.
- Lifetime disability assistance payment – a series of periodic payments, which once started must continue at least yearly until the beneficiary’s death or plan closure.
The financial institution administering the RDSP can only make a payment to the beneficiary if there is enough money in the RDSP to repay the assistance holdback amount after the payment is made. The assistance holdback amount is the total of any grant and bond in the beneficiary’s RDSP that has not yet vested. For more information go to InfoCapsule 17: Assistance Holdback Amount.
Retirement savings rollover and education savings rollover amounts are considered earnings from the plan for taxation purposes. These amounts, as well as grants, bonds and investment earnings that form part of a payment are all taxable and must be reported on a T4A slip for the beneficiary. However, after the beneficiary’s death, payments made to the beneficiary’s estate are taxed to the estate.
Determine the payment rules for taking money out of a plan
An RDSP can find itself in one of the following four situations:
Contributions are greater than grant and bond amounts at the start of the year
Calculate contributions, rollovers, grants, and bonds that have been paid to the beneficiary’s current and prior RDSPs (if applicable). Use only amounts in the plan at the beginning of the year:
- Contributions must include all rollovers made to the beneficiary’s current and prior RDSPs
- Grants and bonds paid to the beneficiary’s current and prior RDSPs
General rules
A beneficiary can receive a disability assistance payment at any age, as long as the holder of the RDSP makes the request. There is no limit to the disability assistance payment amounts a beneficiary receives. For example, a beneficiary could receive the full amount of funds from their plan (minus any assistance holdback amount) and close their plan.
Beneficiary is 59 or younger at the end of the year
RDSP holders can ask to start lifetime disability assistance payments. The payments must be at least $1 per year. The total annual amount cannot be more than the LDAP maximum amount.
Beneficiary turns 60 years old
Lifetime disability assistance payments must start no later than the end of the year the beneficiary turns 60. These payments must be at least $1 per year. The total annual amount of all payments must at least equal the LDAP maximum amount.
Grant and bond amounts are greater than the contributions at the start of the year
Calculate contributions, rollovers, grants, and bonds that have been paid to the beneficiary’s current and prior RDSPs (if applicable). Use only amounts in the plan at the beginning of the year:
- Contributions must include all rollovers made to the beneficiary’s current and prior RDSPs
- Grants and bonds paid to the beneficiary’s current and prior RDSPs
General rules
The holder may ask for a disability assistance payment even if the beneficiary is already receiving lifetime disability assistance payments. The total annual amount of all payments cannot be more than the greater of the LDAP maximum amount and 10% of the RDSP’s fair market value (refer to “specified maximum amount” in subsection 146.4(1) of the Income Tax Act).
Financial hardship waiver
A registered disability saving plan beneficiary may need to take more money out of their plan than the maximum payment rules allow for in a year. The Canada Revenue Agency will consider waiving these rules if the beneficiary is undergoing financial hardship.
Request a financial hardship waiver
An approved financial hardship waiver will allow a beneficiary to receive more money from their registered disability savings plan (RDSP) than the maximum payment rules allow. The Canada Revenue Agency (CRA) will only accept financial hardship waiver requests that meet all of the following conditions:
Condition 1: The RDSP issuer must send the waiver request to the CRA in writing. The CRA will not accept a waiver request that is sent by the plan holder or beneficiary. The issuer must include the RDSP contract number in the waiver request and can send it to:
Registered Plans Directorate
Canada Revenue Agency
2215 Gladwin Crescent
Ottawa ON K1B 4K9
Condition 2: The plan holder and beneficiary are the same person.
Condition 3: The written request must outline why the beneficiary’s financial situation deprives them of the necessities of life. For the purpose of this waiver, this includes accommodation, food, clothing, medical attention, and public utilities such as water, electricity, and heating.
Condition 4: The beneficiary must have low expected income, an unexpected drop in income, or an unexpected rise in their expenses. For the purpose of this waiver, low expected income means the beneficiary’s family income is less than 50% of the year’s maximum pensionable earnings amount.
Medical attention: The beneficiary may have, or will have, an unexpected rise in expenses related to a medical expense.
To be eligible for this waiver for medical attention reasons, the medical expense must be listed in the CRA’s list of common medical expenses. The waiver request must contain any documents listed under “Documents you need to support your medical expenses claim.”Condition 5: The waiver request must describe in detail why the beneficiary needs the extra funds, what the beneficiary will use the funds for, and how much funding they need.
Condition 6: The waiver request must include a letter signed by the holder and their spouse, if applicable. This letter must include:
- consent from the holder to allow the CRA to look at the holder’s tax information so it can verify the holder’s reported income for the current and last three tax years
- a statement from the holder indicating that if the CRA approves the waiver request, the holder understands that:
- the RDSP issuer will return any assistance holdback amount in the plan that is associated with the withdrawal to the federal government
- the return of the Canada disability savings grant and Canada disability savings bond will result in a permanent loss of the returned entitlement
- the contribution room associated with any returned contributions is permanently lost
- the taxable portion of the funds that are withdrawn from the plan will be included in the beneficiary’s income for the tax year in which they are received
- receiving funds withdrawn from the plan could affect the beneficiary’s provincial or federal disability benefits in that year or future years
- each RDSP holder is jointly and severally, or solitarily, liable with the beneficiary for any tax debt resulting from the withdrawn funds being included in the beneficiary’s income
Note: If this information is not given to the CRA, the waiver request will be incomplete. The CRA will automatically deny an incomplete waiver request.
Beneficiary is at least 27 years old at the start of the calendar year
A beneficiary can ask for any type of payment without the permission of the holder(s). A beneficiary cannot ask for any payments after the end of the year they turn 59 years old. The minimum and maximum payment rules in the next paragraph also apply.
Beneficiary is 59 or younger at the end of the year
The holder may ask the financial institution administering the RDSP to make a disability assistance payment(s) to the beneficiary. There is no required minimum payment amount for the year, but there is an annual maximum amount. The beneficiary cannot receive more than the greater of the LDAP maximum amount and 10% of the RDSP’s fair market value in the year.
A holder can ask to start lifetime disability assistance payments. The payments must be at least $1 per year. The total annual amount of these payments cannot be more than the LDAP maximum amount.
Beneficiary turns 60 years old
Lifetime disability assistance payments must start no later than the end of the year the beneficiary turns 60. These payments must be at least $1 per year. The total annual amount of all payments must at least equal the LDAP maximum amount.
Payment request is made for a specified year
There is no limit to the amount of money that a beneficiary can receive from their RDSP in a specified year.
General rules
A beneficiary can receive a disability assistance payment at any age. The holder(s) of the RDSP must make the request.
Beneficiary is 59 or younger at the end of the year
The RDSP holder(s) can ask the financial institution administering the RDSP to start paying the beneficiary lifetime disability assistance payments. The payments must be at least $1 per year.
Beneficiary turns 60 years of age old
Lifetime disability assistance payments must start no later than the end of the year the beneficiary turns 60. These payments must be at least $1 per year. The total annual amount of all payments must be at least equal to the LDAP maximum amount.
Plan is a specified disability savings plan
The beneficiary must start receiving a minimum annual amount by the second year the plan is a specified disability savings plan. The holder must make the request for the beneficiary to start receiving payments.
The amount of the payment must be at least equal to the LDAP maximum amount. This amount must be calculated and paid each year the plan is a specified disability savings plan.
The financial institution must determine which of the following payment rules apply:
- If the taxable portion of the LDAP maximum amount is more than $10,000, there is no limit to the amount that the beneficiary can receive in the year.
- If the taxable portion of the LDAP maximum amount is less than $10,000:
- The beneficiary can receive up to $10,000 in taxable amounts in the year. If there are contributions in the plan, payments will also include a non-taxable amount.
- If there are only taxable amounts in the plan, the maximum payment is $10,000.
- The beneficiary can receive a higher amount if the holder(s) makes a request to the financial institution in each year they would like the beneficiary to receive more. The financial institution will have to apply to the Canada Revenue Agency and request a waiver.
Request a waiver to receive more than the maximum payment
The financial institution must apply for a new waiver each year the holder asks for more than the $10,000 taxable limit. The CRA will consider the waiver on an annual basis.
If the CRA grants the waiver, the beneficiary is allowed to receive:
- First year: up to 20% of their plan funds
- Second year: up to 25% of their plan funds
- Third year: up to 33.3% of their plan funds
- Fourth year: up to 50% of their plan funds
- Fifth year: balance of their plan funds
This allows the beneficiary to get all of the plan funds over a 5-year period. The amount is based on the fair market value as of January 1 of the year it is withdrawn.
To request a waiver, the financial institution administering the RDSP must send a letter to the Canada Revenue Agency. The letter must include:
- the RDSP contract number
- the current fair market value of the plan as of the waiver request date
- the amount of contributions, grants, and bonds in the plan as of the waiver request date
- a letter of request from the holder
By mail and courier
Due to a building refit spanning multiple years, the Registered Plans Directorate’s mailing address has been temporarily changed. Please use the following address for all correspondence until further notice:
Registered Plans Directorate
Canada Revenue Agency
2215 Gladwin Cres
Ottawa ON K1B 4K9
Refer to paragraphs 59 to 62 of information circular IC 99-1R Registered Disability Savings Plans for specified disability savings plan conditions.