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RDSP Transfers and Beneficiary Changes

Learn how to transfer an RDSP to another institution and understand what happens to the plan when the beneficiary dies

Managing a Registered Disability Savings Plan (RDSP) involves more than just contributions and withdrawals. There are important administrative processes to understand, especially when it comes to transferring your RDSP to another financial institution or handling the account after the beneficiary’s death.

Knowing how these situations are managed helps you avoid unintended tax consequences and ensures your plan stays aligned with your goals.

Transferring an RDSP to Another Financial Institution

You may wish to transfer an RDSP to another provider for better investment options, lower fees, or improved service. Fortunately, RDSPs can be transferred between financial institutions without tax consequences, if done correctly.

Key steps:

  • The transfer must be completed as a direct transfer between registered plans.

  • Partial transfers are not allowed; the entire RDSP must be moved.

  • Contributions, grants, bonds, and investment growth are all transferred to the new plan.

  • No new government grants or bonds are issued during the transfer process until it is complete.

Optimize assists with managing this process to ensure seamless execution and compliance with CRA rules.

What Happens to an RDSP When the Beneficiary Passes Away

An RDSP cannot continue to exist after the beneficiary’s death. The account must be closed, and remaining assets distributed according to specific rules.

RDSP Component Treatment Upon Beneficiary’s Death
Government grants and bonds (received in last 10 years) Must be repaid to the government
Personal contributions Returned tax-free to the estate (made with after-tax dollars)
Investment growth Paid to the estate; taxable as part of the income portion
Grants, bonds, and growth combined Taxable income to the beneficiary’s estate

This process ensures that remaining RDSP funds are distributed while meeting CRA compliance.

Estate Planning Considerations for RDSP Beneficiaries

While RDSP assets form part of the beneficiary’s estate, they are not transferable to another beneficiary’s RDSP. Each RDSP is tied to the individual for whom it was created.

Families should:

  • Plan for the potential impact of grant/bond repayments.

  • Understand how RDSP proceeds will be taxed in the estate.

  • Consider how RDSP assets fit within the broader estate plan.

Optimize works with you to integrate RDSP considerations into your overall estate planning.

How Optimize Helps You Manage RDSP Transfers and Estate Planning

At Optimize, we guide you through the administrative and strategic aspects of RDSP management. We help you:

  • Coordinate RDSP transfers between financial institutions, ensuring no tax or compliance issues.

  • Advise on when a transfer is beneficial, balancing fees, investment options, and service quality.

  • Plan for the orderly closure of an RDSP in the event of a beneficiary’s death.

  • Model the tax impact on the estate and develop strategies to manage it.

  • Incorporate RDSP considerations into your broader estate plan, providing clarity and peace of mind.

With Optimize’s expertise, you can manage RDSP transfers and estate matters with confidence, knowing your family’s financial security remains the priority.