All About Estates

Draft Legislation Released for Changes to Registered Disability Savings Plans

In the 2019 federal budget, the government announced changes to the rules in the Income Tax Act (“ITA”) that govern registered disability savings plans, or RDSP’s (also referred to in this blog as a “plan”). On July 30, 2019, the Minister of Finance released the draft legislation and explanatory notes for those changes.

Under the existing rules, the beneficiary of an RDSP must qualify for the disability tax credit (“DTC”) at the time the RDSP is opened. If the beneficiary later becomes ineligible for the DTC, there are consequences both for the continued existence of the plan and contributions to the plan.

The existing rules provide that the plan must terminate at the end of the calendar year following the year the beneficiary becomes ineligible for the DTC, unless the holder of the plan makes a “DTC election”. A DTC election is available if a medical doctor or nurse practitioner certifies in writing that the beneficiary is likely to become eligible for the DTC in a future taxation year. The election terminates if the beneficiary later becomes eligible for the DTC, or at the end of the fourth year following the year the election is made, whichever occurs first. If the DTC election expires for time (i.e. the latter reason), the plan must terminate at the end of the following year.

With respect to contributions, the existing rules prohibit contributions to the plan if the beneficiary becomes ineligible for the DTC, unless there is a valid DTC election in place and the contribution otherwise qualifies as a tax-deferred rollover to the plan from certain registered accounts of a deceased person (RRSP, RRIF, registered pension plan, pooled registered pension plan, specified pension plan).[1]

Under the new RDSP rules, a beneficiary must still be eligible for the DTC when the RDSP is opened, unless the RDSP is being opened to receive a transfer from an existing RDSP for that beneficiary. If the beneficiary later becomes ineligible for the RDSP, the new rules permit the plan to remain open indefinitely, although the holder can voluntarily terminate the plan. Contributions are not permitted to the plan while the beneficiary is ineligible for the DTC, unless the contribution qualifies as a tax-deferred rollover from the registered accounts described above and the contribution is made before the end of the fourth taxation year following the year the beneficiary became ineligible for the DTC. As a result of these changes, the concept of a “DTC election” is no longer required and has accordingly been removed.

If the new RDSP rules are passed in their current form, they will take effect on January 1, 2021. However, transitional rules are included for the period between March 19, 2019 (i.e. budget day) and December 31, 2020. If, during that time, an RDSP would be required to terminate under the existing rules because the beneficiary is no longer eligible for the DTC or a DTC election expires for time, the plan is not required to terminate. The transitional rules are deemed effective as of March 19, 2019.


[1]       The rules to qualify for such a rollover are set out in section 60.02 of the ITA.

About Darren Lund
Darren Lund is a member of the Trust, Wills, Estates and Charities at Fasken, Toronto office. Darren has expertise in a broad range of estate planning matters, including multiple wills, inter vivos trusts, disability planning, estate freezing, and planning for beneficiaries and assets outside Canada. Darren advises trustees and beneficiaries on all aspects of estate administration, both contentious and non-contentious, and his experience includes passing of fiduciary accounts, trust variations, post-mortem tax planning, and administering the Canadian estates of non-residents. He also speaks and writes on a variety of related topics such as estate planning for spouses and couples, inheriting overseas property and estate planning for persons with disabilities. He previously practised estates law at a large national law firm. Email:


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