Disability assistance payments
Differentiating a lifetime disability assistance payment from a disability assistance payment
A disability assistance payment (DAP) is any payment made from a disability savings plan to the beneficiary or to the beneficiary's estate after the death of the beneficiary. To be registered, a plan must state whether or not DAPs that are not lifetime disability assistance payments (LDAPs) are to be permitted under the plan; however, the plan must still include a provision to allow beneficiary directed DAPs as outlined in subparagraph 146.4(4)(n)(ii) of the Income Tax Act.
An LDAP is a DAP that is identified in the disability savings plan as a lifetime disability assistance payment. Once an LDAP begins to be paid, it must continue to be paid at least annually until the beneficiary dies or the plan is terminated.
Determining when an issuer should pay a DAP or an LDAP from a plan
In general, if the terms of the registered disability savings plan (RDSP) permit, DAPs may be made to a beneficiary of an RDSP at any time with the following exceptions:
- A DAP can’t be paid if it would cause the value of the RDSP's assets to fall below the assistance holdback amount, which could result in the RDSP being unable to satisfy an obligation to repay Canada disability savings grants and bonds to the Minister of Employment and Social Development (ESD) under the Canada Disability Savings Act.
- LDAPs must begin to be paid no later than the end of the calendar year in which the beneficiary turns 60 and once they begin to be paid, they must continue to be paid at least annually. The only exception to this is if the RDSP is being opened in a year when the beneficiary is 60 years of age or older (which can occur only if the plan is being set up to receive funds transferred from another RDSP of the beneficiary). In this case, LDAPs must begin to be paid before the end of the year following the year in which the RDSP is set up.
- If immediately before the beginning of the year all government contributions paid to any plan of the beneficiary are more than all holder contributions paid to any plan of the beneficiary, then the total of all DAPs for the year must be limited to the greater of the formula in paragraph 146.4(4)(l) of the Income Tax Act and 10% of the fair market value of the assets held in the plan at the beginning of the year (this rule does not apply if the year is a specified year).
For more information on the RDSP program, see IC99-1R1.
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