- Most registered plans — RRSPs, RRIFs, TFSAs — pass to a named beneficiary or to the estate largely intact, based on what's actually in the account.
- The beneficiary dies, which is a triggering event requiring the RDSP to be collapsed (closed out).
- - Don't distribute against the full account balance.
If someone you're administering an estate for had a Registered Disability Savings Plan, don't assume the full balance sitting in that account is what the estate will actually receive. RDSPs come with a federal repayment mechanism — often called the "10-year rule" — that can require a portion of the government grants and bonds paid into the plan to be repaid to the government when the beneficiary dies, rather than passed on to the estate.
This catches families off guard because it isn't intuitive: the plan statement shows one number, and the amount the estate actually collects can be meaningfully lower. Understanding roughly how this works — and knowing to verify the exact mechanics before making promises to beneficiaries — matters for anyone administering an estate that includes an RDSP.
Why RDSPs Are Different From Other Registered Plans
Most registered plans — RRSPs, RRIFs, TFSAs — pass to a named beneficiary or to the estate largely intact, based on what's actually in the account. An RDSP is different because a meaningful part of its balance may not be the beneficiary's own money at all — it can include Canada Disability Savings Grants and Bonds contributed by the federal government over the life of the plan, on top of what the family contributed directly.
Because those government contributions were paid in to support the beneficiary specifically, federal rules generally require some of that government money to be repaid when the plan is closed for a triggering event — including the beneficiary's death — rather than distributed as though it were the beneficiary's own savings.
What Happens, in General Terms
- The beneficiary dies, which is a triggering event requiring the RDSP to be collapsed (closed out).
- The plan issuer calculates what's known as the repayment obligation — a figure based on how much in grants and bonds was paid into the plan within a specific look-back period before the triggering event.
- That repayment amount is returned to the federal government out of the plan before anything else happens.
- What's left — generally the beneficiary's own contributions, any grants/bonds outside the repayment window, and investment growth — is then paid out according to the plan's terms, typically to the beneficiary's estate.
The exact look-back period, the calculation method, and how it interacts with other plan rules are set by federal legislation and program policy that can be updated. Because this figure directly affects what an estate will actually receive, don't estimate it yourself or rely on an outdated explanation — the RDSP issuer can confirm the actual repayment calculation for that specific plan, and Employment and Social Development Canada is the authority on current program rules.
What This Means for an Estate Trustee
- Don't distribute against the full account balance. Wait for the plan issuer to confirm the net amount after any repayment obligation before finalizing distributions that depend on it.
- Contact the RDSP issuer early in the administration process — they need to be notified of the beneficiary's death and will walk the estate trustee through the plan's own closeout process.
- Keep beneficiaries informed that the final RDSP proceeds may be lower than the last statement suggested, so expectations are set correctly from the start.
- Coordinate with the estate's other assets — if the RDSP proceeds are lower than expected, it may affect how other bequests or the residue are calculated, depending on how the will is worded.
A Comparison: RDSP vs. Other Registered Plans at Death
| Plan type | What typically happens at death |
|---|---|
| RRSP / RRIF | Generally passes to a named beneficiary or the estate at its account value, subject to tax treatment on the deceased's final return |
| TFSA | Generally passes to a named beneficiary or successor holder largely intact |
| RDSP | Must be collapsed; a repayment obligation on government grants/bonds paid in the relevant look-back period is deducted before the remainder is paid out |
This is one of the more counterintuitive features of RDSPs for families and executors who are used to how other registered plans behave at death.
Frequently asked questions
Does this mean the estate loses all the government contributions?
Not necessarily all of them — grants and bonds contributed outside the relevant look-back period, along with the beneficiary's own contributions and investment growth, are generally not subject to the repayment obligation. The exact split depends on the plan's contribution history, which the issuer can confirm.
Who actually calculates the repayment amount?
The RDSP issuer (the financial institution holding the plan) calculates the amount based on the plan's records and federal program rules, and coordinates the repayment to the government as part of closing the plan.
Can this rule be avoided with planning?
Some planning choices — such as the timing and pattern of contributions over the beneficiary's lifetime — can affect the eventual repayment exposure, but this is technical territory best discussed with a financial advisor familiar with RDSPs alongside your estate planning lawyer, rather than something to plan around alone.
What should I tell the family while we wait for the final number?
Be honest that the plan statement isn't the final distributable amount, and that the RDSP issuer needs to confirm the net figure after any government repayment before the estate can rely on it.
This is a wills & estates question
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