Providing for a Lifetime – Summer 2021


Audrey Veltri, IG Wealth Management

July 2021
Registered Disability Savings Plans (RDSP’s) certainly come with many rules, as discussed in the 2021 winter edition of Providing for a Lifetime. They are also accompanied by some beneficial planning opportunities in the form of rollovers. These tools were introduced with the goal of giving more flexibility and providing greater long-term financial security for supporting loved ones with a disability.

What is a Rollover? Simply put it is the opportunity to move funds from one account structure to another without incurring a current tax liability. Yes, you get to defer the taxes to a future time and in the case of an RDSP rollover, to another person.
Registered Education Savings Plan Rollovers
The first rollover provision involves the Registered Education Savings Plan (RESP). This rollover, which was introduced in 2012, permits accumulated income payments from the RESP to be rolled to the RDSP providing the beneficiary of both accounts is the same. This amount counts towards the $200,000 lifetime contribution amount, but the funds transferred do not count as a contribution for grant purposes- so they will not be matched. When the rollover occurs any education grants or bonds remaining in the RESP are returned to the government.
Some other noteworthy rules :
  • the beneficiary must be DTC eligible at the time of the rollover, be 58 years or younger, be living, and be a resident of Canada.
  • the beneficiary’s impairment prevents them from enrolling in post-secondary or the RESP must have been either:
    • open for at least 10 years and the beneficiary is at least 21 years of age or
    • the RESP has been open for 35 years.
What’s the big deal? Well, if you didn’t make use of the rollover, and the beneficiary didn’t use the RESP- the RESP would close. Education grants and bonds would be repaid, and the balance of capital would be returned, and investment income would be paid out to the owner (you) and subject to tax at your marginal tax rate. Not effective.
Another beneficial feature of the rollover is that amounts rolled from a RESP count towards the determination of whether the RDSP is a Primarily Government Assisted Plan (*PGAP). From a planning perspective the rollover can serve as a source of future funds waiving this restriction to provide increased flexibility for upcoming Lifetime Disability Assistance Payments.
It can be advantageous to wait until you are certain that the beneficiary will not attend any form of post-secondary prior to making the rollover election. RESP’s come with some more lenient rules when they are opened for a beneficiary who is disabled. These concessions are designed to provide increased flexibility, recognizing that education may look slightly different for Canadians living with a disability. They include:
  • that the plan can be left open for 40 years.
  • part time studies
  • definitions of qualifying programs
Registered Retirement Savings Plan Rollovers
The second permissible rollover is from a Registered Retirement Savings Plan (RRSP) and was introduced in 2010. These rollover rules also apply to Registered Retirement Income Funds, some lump sum payments from Registered Pension Plans and Pooled Registered Pension Plans.
Rollovers are only permitted from a deceased individual’s RRSP to their financially dependent child or grandchild. Similarly, to the RESP rollover, amounts rolled from an RRSP count towards the $200,000 lifetime contribution limit but are not considered for grants and thus are not eligible for matching from the government.
An individual does not need to live with the beneficiary to demonstrate financial dependence. However, determining financial dependence can be challenging. One important factor in this determination is to confirm if the beneficiary’s income is under the basic personal amount plus disability amount, which is $22,470 for 2021, this amount is indexed annually to inflation.

In the same way as within a RESP rollover, the amounts transferred from a RRSP are considered for the purpose of determining the *PGAP status of an RDSP. And as such provide another available source to contribute to waiving the limit of withdraws in the future.
In the same way as within a RESP rollover, the amounts transferred from a RRSP are considered for the purpose of determining the *PGAP status of an RDSP. And as such provide another available source to contribute to waiving the limit of withdraws in the future.
Amounts rolled to the RDSP move on a tax deferred basis, avoiding some of the tax the estate would normally pay. This serves to reduce the estate tax and increase the overall inheritance provided to both the beneficiary of the RDSP and to other potential estate beneficiaries.
Let’s look at an example (courtesy of **Mackenzie Investments):

This example clearly outlines the financial benefits of RRSP rollovers by increasing the amount given to Jane’s disabled son by $90,000! Additionally, these amounts are; available for use immediately, not subject to AHA or repayment obligation, have served to waive the *PGAP rule and best of all are in an account that are protected from provincial assistance benefit cutbacks.
Careful planning should always be provided for rollovers. It is strongly recommended to seek advice from a financial planner or tax specialist prior to making an election to ensure you’ve considered the options available and the implications to your family.
*PGAP, Primarily Government Assisted Plan.
A PGAP RDSP refers to an RDSP where the government has contributed more funds than private contributions. In the case of a PGAP there is an annual limit placed on Lifetime Disability Payments LDAP’s
**Mackenzie Investments. Can you roll over your registered plan to an RDSP?
If you or someone you care about has questions about this article or could benefit from disability supports and planning for the future, I am here to help.
IG Wealth Management_Audrey Veltri

We provide financial guidance to families supporting dependents with a disability and family stewards to ensure effective access to all financial programs and government supports. We implement strategies to protect these supports and guide families through periods of transition and all life stages. We create solutions that transcend generations, so families can enjoy today, embrace tomorrow and secure a comfortable, safe and healthy future for the whole family.
Audrey Veltri|403.619.0410|