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There are two ways a beneficiary of a Registered Disability Savings Plan (RDSP) can withdraw funds.
Annual withdrawals
Annual withdrawals, or Lifetime Disability Assistance Payments (LDAPs), begin by the end of the year in which the beneficiary turns 60. These annual payments will then continue for the life of the beneficiary.
The maximum annual payment amount is based on the beneficiary’s age and the fair market value of the plan.
One-time withdrawal
This form of withdrawal is known as Disability Assistance Payments (DAPs), and can be paid to the beneficiary any time after the RDSP is established. However, this payment has a few important conditions to note —
- A DAP cannot be paid if it causes the value of the RDSP to fall below the total amount of grants and bonds that have been paid into the plan within the last 10-year period less any amount of grants and bonds paid in that period that has been repaid to the government
- While withdrawals from the plan can be made at any time for the benefit of the beneficiary, it is very important to note that any grant or bond received within 10 years prior to a payment must be repaid, as the plan is intended to encourage long-term savings
How withdrawals are treated
Amounts paid include a blend of taxable and non-taxable amounts. The CDSG, CDSB and income components are fully taxable to the beneficiary, while contributions are not taxed.
These payments will not affect your eligibility for federal government benefits, such as the Canada Child Tax Benefit or the Goods and Services Tax Credit, nor will Old Age Security or Employment Insurance benefits be affected.
Most provinces are participating in this program. However, provincial and territorial rules may differ. Please consult your provincial/territorial government for more information on the potential impact of RDSP assets and payments.
For more information, or to open a Registered Disability Savings Account, please visit any TD Waterhouse Investor Centre or TD Canada Trust branch, or speak with an Investment Representative at 1-866-280-2022.
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