Specified Disability Savings Plan – SDSP – How Does it Work ?

Let me preface this with, this stuff is complicated. I have read over the documentation, and this is my interpretation of what I have read. While it is important to have rules to ensure systems are not abused, this is a bit extreme. The SDSP (Specified Disability Savings Plan) is one of the exceptions possible in the RDSP program, keep that in mind. If you are unsure, call for help.

The Registered Disability Savings Plan (RDSP) has strict rules for withdrawals. The rules ensure that the RDSP “…cannot be used like a chequing account…”. That was a direct quote from an ESDC source.

I will be writing more about this, in the near future.

The rules for withdrawals are:

“Whenever money is withdrawn from an RDSP, all or part of the grants and the bonds that have been in the RDSP for fewer than 10 years must be repaid to the Government. You must repay $3 for every $1 that is taken out, up to the total amount of grants and bonds paid into the RDSP in the last 10 years. Repayments to the Government of Canada will be applied starting with the oldest grants and bonds paid into the plan first, and then towards the newest.”
— ESDC RDSP Withdrawal page

Specified Disability Savings Plan SDSP

The specified disability savings plan SDSP, is a clause in the RDSP for disabled people with a shorter life expectancy. It allows families dealing with the imminent death of a loved one to extract money (early) from an RDSP (without penalties).

To get an SDSP, the beneficiary must have an RDSP.  A Doctor must attest the holder of the RDSP will most likely die within 5 years. The RDSP holder then must elect to convert their RDSP to an SDSP, and ESDC must approve this election.

Once the RDSP changes to an SDSP no further money can be deposited in the account. If money is deposited, the SDSP will revert back to an RDSP. In this instance all associated early withdrawal penalties, would come into play.

The maximum that can be taken out per year from the fund is $10,000.

This is one of the few exemptions for taking money out of your RDSP early. Remember the RDSP is a very long-term savings vehicle.