Specified disability savings plan (SDSP)
A specified disability savings plan (SDSP) is a measure to provide beneficiaries who have shortened life expectancy with greater flexibility to access their savings from an RDSP. Withdrawals from an SDSP will not trigger a repayment of the assistance holdback amount as long as the sum of the taxable portion of all withdrawals made in the year does not exceed $10,000 (unless the LDAP formula result requires a greater amount to be paid). However, once the election is made, no more contributions can be made to the plan and the plan will not be entitled to any new grant or bond. Furthermore, beneficiaries will not be entitled to carry forward any grant or bond for those years under this plan.
When does an RDSP become an SDSP?
The RDSP becomes an SDSP when:
- a licensed medical doctor or nurse practitioner certifies in writing that the beneficiary of an RDSP is, in their professional opinion, unlikely to survive more than five years
- the holder of the RDSP elects in prescribed form and provides the election, along with the medical certification, to the issuer of the RDSP
- ESDC receives notification of the election from the issuer
When does a plan stop being an SDSP?
A plan stops being an SDSP if any of the following occur:
- ESDC receives notification from the issuer of the plan that the holder elects to have the plan stop being an SDSP
- the total of the taxable portion of the DAPs made from the plan in the year while it was an SDSP that exceeds $10,000 (unless the LDAP formula result requires a greater amount to be paid (see the last bullet))
- a contribution, bond, or grant is paid into the plan
- an amount is paid into the plan from a designated provincial program
- the plan is terminated
- the plan stops being an RDSP
- it is the beginning of the first calendar year throughout which the beneficiary under the plan is no longer eligible for the DTC
- payments have not begun to be paid before the end of the particular calendar year following the year in which the plan last became an SDSP
- an registered educational savings plan rollover is made
- the total amount of DAPs made from the plan to the beneficiary in the calendar year is less than the amount determined by the LDAP formula or an amount equal to the FMV of the property in the plan, whichever is the lesser
The holder must wait 24 months after the plan stopped being an SDSP before making a new election.
Additional rules if the RDSP is a primarily government assisted plan (PGAP) in the year
An RDSP becomes a PGAP in a year when the total of all government grant and bond payments made into any of the beneficiary’s RDSPs in the previous years is more than the total of all private contributions made to any of the beneficiary’s RDSPs in the previous years.
Generally, in a PGAP year (other than a specified year), the DAPs (including LDAPs) must not exceed the greater of the LDAP formula and 10% of the fair market value (FMV) of the plan assets at the beginning of the year. Certain DAPs made following, and as a consequence of, a transfer of property from another RDSP of the beneficiary do not count toward this limit on DAPs.
In any year where the beneficiary is over the age of 59, the LDAP payment will not be more than the LDAP formula. In a PGAP year, the combination of LDAPs and DAPs must not exceed the greater of the LDAP formula and 10% of the FMV of the plan assets at the beginning of the year.
When the beneficiary turns 28 (or any later age up to, and including, the age of 58) during the calendar year, the beneficiary has the right to direct that DAPs be paid to him or her at any time in that year if, after payment, the FMV of the property in the RDSP is not less than the assistance holdback amount for the RDSP. The DAP that can be paid under these circumstances cannot be more than the calculated allowable amount. With the exception of plans where the beneficiary is over the age of 59, a DAP made in any other year may require that the assistance holdback amount be repaid to ESDC.
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