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Roll the Beneficiary’s RRSP into an RDSP

People who have become disabled later in life have often worked and accumulated assets in Registered Retirement Savings Plans.  If they are eligible to open a Registered Disability Savings Plan, rolling their RRSP into their RDSP may be advantageous some advantages.  The greatest advantage would be that people would be able to shelter assets to supplement their provincial disability benefits over many years rather than using their assets over a short period of time and then being solely dependent on provincial benefits. Later, if they qualify for Guaranteed Income Supplement, the income from an RDSP would not reduce their GIS payments the way that RRSP income does (at 50%).  It also might simplify their financial situation, if people could have their assets in one place.

Whether or not it would actually make sense to roll an RRSP into an RDSP would be dependent on the beneficiary’s financial situation (i.e. amount held in RRSPs, contribution room in RDSP, income sources, age, other assets and income).

A precedent for RRSP rollovers, exists with the rollover to the RDSPs of children and grandchildren.  This model deals with the tax ramifications, which are a major consideration of the federal government.  Furthermore, the rules for this provision could mirror the current RRSP/RRIF rollovers where:

  • The rollover would result in taxable income but would be tax neutral to the plan holder as a result of an offsetting tax deduction
  • The rollover would count as contribution and be limited by contribution limits, but would not result  in the payment of Canada Disability Savings Grant
  • The rollover would be part of the taxable portion of a future RDSP withdrawal.

Recommendation: Permit the rollover of beneficiary’s RRSPs to RDSPs on the same terms as the current RDSP/RRIF rollovers to RDSPs.