What happens to an RDSP if the disabled beneficiary dies before the plan is fully used?

The RDSP has to be closed, since it exists solely for that one beneficiary. There's no way to keep it open or transfer it to someone else once they've died, regardless of how much of the plan's potential was actually used during their lifetime. The account is wound up, any government grants or bonds subject to repayment under the federal program rules are returned to the government, and the remaining after-tax proceeds are paid out to the beneficiary's estate.

From there, those proceeds become part of the estate and are distributed according to the deceased's will, or under Ontario's intestacy rules if there was no will, so the RDSP funds essentially flow into the same estate administration process as any other estate asset once they leave the plan itself.

This can feel like an unexpected outcome for families who think of the RDSP as belonging permanently to their family member, so it's worth understanding in advance: money accumulated in an RDSP, including government contributions, is not preserved or passed forward as an RDSP for another disabled family member. It becomes part of the deceased beneficiary's estate like any other asset once the plan closes.