The RDSP was introduced in the 2007 Federal Budget and became available to contribute to on December 1, 2008. On December 23, 2008 the deadline for contributing to these and applying for the RDSP Grant & Bond was extended to March 2,2009 for the 2008 tax year.
An RDSP is a trust arrangement between a holder and an issuer, much like an RRSP.
The purpose of the plan is to provide for the long-term financial security of a beneficiary who has a prolonged and severe physical or mental impairment. The beneficiary named under the RDSP must be eligible to receive the Disability Tax Credit.
Contributions to the plan can by the beneficiary, family members or other authorized contributors.
Contributions to the plan are not tax deductible, however the earnings generated remain tax-exempt while they stay in the plan.
Contributions to an RDSP may be supplemented by payments from the Canada Disability Savings Grant program. Lower income families may qualify for payments from the CDSG program without having to make a contribution to an RDSP.
A beneficiary may have only one RDSP at any given time, although the plan may have several plan holders. The plan holder is the person who establishes the RDSP and makes contributions on behalf of the benficiary.
There is no annual contribution limit on amounts which can be contributed to an RDSP of a particular beneficiary. There is alifetime limit of $200,000 and contributions are only permitted until the end of the year in which a beneficiary turns 59 years of age.
Only certain types of payments can be made from the RDSP. For more info on these refer to the Govenment pamphlet below.
When payments are made out of the RDSP, they are included in the beneficiary's income for tax purposes.