Does an RDSP have to be cashed out immediately when the beneficiary passes away in Ontario?

An RDSP is tied to one specific beneficiary, so it does have to be wound up when that person dies — it can't simply continue for someone else the way some other accounts can. That said, "immediately" doesn't mean overnight; the RDSP issuer works with the beneficiary's legal representative, usually the estate trustee, to close the plan in an orderly way, and there's typically a window to complete the process rather than a same-day requirement.

When the plan closes, the remaining funds — personal contributions, investment growth, and any government grants and bonds still in the plan — are dealt with according to federal program rules, and the after-tax proceeds are paid out to the beneficiary's estate. Grants and bonds paid into the plan relatively recently before death are often subject to repayment to the government, though the exact repayment mechanics depend on program rules that change over time and are best confirmed directly with the RDSP issuer.

Because this intersects Ontario estate administration with a federally regulated savings program, the estate trustee should contact the RDSP issuer promptly after death to understand the specific timeline and amounts involved, rather than assuming the money is simply available right away.