Is the rollover to a disabled beneficiary the same for an RRSP successor annuitant as for an RDSP?
Not quite; these operate under different mechanics, even though both can benefit a disabled family member. Under federal tax rules, RRSP and RRIF proceeds can roll over on a tax-deferred basis to a spouse, as a successor annuitant continuing the plan, or in some cases to a financially dependent infirm or disabled child or grandchild, which can include a rollover into that person's own RDSP, subject to specific conditions and limits set by federal tax rules. This lets the tax on the deceased's RRSP or RRIF be deferred rather than triggered immediately on death.
An RDSP itself works differently: it's built specifically for one particular disabled beneficiary, and it doesn't have an equivalent successor mechanism that lets it continue on for someone else after that beneficiary's own death. When the RDSP beneficiary dies, the plan is wound up rather than rolled over to a new beneficiary. So while money can flow from an RRSP or RRIF into an RDSP for a living disabled beneficiary, the RDSP itself doesn't roll forward again once its beneficiary has died.
Because the rules involve specific conditions and limits, confirm the details with an accountant or lawyer familiar with both programs before relying on a rollover as part of your plan.
Key takeaways
- RRSP and RRIF proceeds can roll over tax-deferred to a spouse or dependent disabled child.
- That rollover can include contributing into the disabled person's own RDSP, within limits.
- An RDSP itself has no successor mechanism and is wound up on the beneficiary's death.
- Confirm the specific conditions and limits with an accountant or lawyer.