Canada Disability Savings Act

DEFINITION: Canada Disability Savings Act
The Canada Disability Savings Act is a federal legislation passed in 2007 that establishes the framework for the creation and management of Registered Disability Savings Plans (RDSPs) in Canada. These plans are designed to help individuals with disabilities and their families save for long-term financial security.


1. What is a Registered Disability Savings Plan (RDSP)?
A RDSP is a specialized savings account that allows individuals with disabilities to accumulate funds for future financial needs, such as medical expenses, housing, and other disability-related costs.

2. Who is eligible to open an RDSP?
To open an RDSP, an individual must be eligible for the Disability Tax Credit (DTC) and under the age of 60. The disability must be prolonged and severe enough to significantly impact their everyday life.

3. Can family members or friends contribute to an individual’s RDSP?
Yes, family members, friends, or anyone else can contribute to an individual’s RDSP, as long as they have the individual’s permission to do so.

4. Are there any government contributions available for RDSPs?
Yes, the Canadian government provides two types of contributions to RDSPs: the Canada Disability Savings Bond (CDSB) and the Canada Disability Savings Grant (CDSG). These contributions are based on the individual’s family income and can significantly boost the savings in the RDSP.

5. When can funds be withdrawn from an RDSP?
Funds can be withdrawn from an RDSP at any time, but strict rules apply to ensure that the funds are used for the benefit of the individual with the disability. Generally, withdrawals are subject to taxation, but they may be partially or fully exempt in certain circumstances.

6. Can an RDSP account be transferred to another beneficiary?
Yes, if the original beneficiary passes away, their RDSP account can be transferred to another eligible family member, such as a sibling, parent, or grandparent. This ensures that the savings can continue to benefit individuals with disabilities.

7. What happens to the RDSP if the beneficiary becomes ineligible for the Disability Tax Credit (DTC)?
If the beneficiary becomes ineligible for the DTC, the RDSP will enter a period called a “cessation event.” During this time, no contributions can be made, and government grants and bonds will no longer be provided. However, the funds already in the RDSP can still be maintained and invested for the beneficiary’s future needs.