Rolling an RRSP to a Disabled Child's RDSP at Death in Canada

If your child has a disability, your RRSP or RRIF may be able to help support them after you are gone. Canadian tax rules allow a special rollover to a registered disability savings plan, or RDSP, that can defer tax on the money.

This article explains who qualifies, how the rollover is reported, and what to check. It is general information and does not replace advice on your own estate.

This article covers Canadian federal tax law, which applies in every province.

Why the rollover is useful

At death, the annuitant of an RRSP is treated as having received the fair market value of the plan immediately before death, and that amount is taxed on the final return. The deceased bears that tax even if someone else receives the money, unless a qualifying survivor receives a refund of premiums.

The RDSP rollover is one way a qualifying survivor can move the money into a registered plan instead. The Income Tax Act allows a deduction for payments to an RDSP as permitted under s. 60.02.

Without a rollover, the deemed amount is added to the deceased's other income for the year of death and taxed at graduated rates. For 2026, the federal rates are 14% up to $58,523, 20.5% from $58,523 to $117,045, 26% from $117,045 to $181,440, 29% from $181,440 to $258,482 and 33% above $258,482, and provincial or territorial tax applies on top. A large plan can therefore mean a large tax bill on the final return, which is why a rollover can matter.

Who qualifies

RRSP or RRIF proceeds can be rolled over to the RDSP of a child or grandchild who is dependent because of impairment in physical or mental functions. That child or grandchild must be the RDSP beneficiary.

The child or grandchild must also be financially dependent on the annuitant. For a dependant with a mental or physical infirmity, the income limit is higher than usual: the basic personal amount plus the disability amount. A financially dependent child or grandchild without an infirmity must have ordinarily resided with and depended on the annuitant, with net income for the year before death below the unreduced maximum basic personal amount, and can transfer a refund of premiums only to an eligible annuity, so the RDSP rollover is for a child or grandchild with an impairment.

• The rollover is available since July 1, 2011.
• It is subject to the $200,000 lifetime RDSP limit.
• Non-resident dependants may qualify if they received significant financial support, but a written request to the CRA tax services office is needed.

A qualifying survivor is the deceased annuitant's spouse or common-law partner, or a financially dependent child or grandchild. A financially dependent child or grandchild may roll over a refund of premiums even if the deceased left a spouse or common-law partner. Separately, the deemed receipt does not apply where a spouse or common-law partner is designated as sole beneficiary and all the property is transferred to the spouse's RRSP or RRIF, or otherwise rolled over, by December 31 of the year following the year of death.

How it is reported

The rollover is deducted on line 23200. Line numbers and slip boxes can change with form versions, so check the current return, guide and the slip you receive. A qualifying survivor who receives a refund of premiums includes it in their own income and can deduct it by transferring it to a RRIF, RDSP or annuity.

The transfer must be completed in the year the money is received or within 60 days after the end of that year. Because it is easy to miss, the executor and the RDSP issuer should agree on timing early.

The deemed amount is shown in box 34 of a T4RSP issued to the deceased for the year of death and is reported on the final return. When a spouse or common-law partner and other people share the plan, each recipient gets a T4RSP for their share, and the final return carries the box 34 amount reduced for amounts rolled to qualifying survivors.

If the plan falls in value between death and the final distribution, the legal representative can ask that the decrease be carried back and deducted on the final return, using Form RC249 and a reassessment. No decrease-in-value deduction is available when the amount was never included in the deceased's income, for example where the full amount was rolled to the spouse. How this applies when part of a plan is rolled over depends on the facts, so it is worth confirming with a lawyer or accountant.

The decrease-in-value deduction is also generally unavailable if the plan held a non-qualified investment after death, or if the final distribution is made after the end of the year following the year of death, although the CRA may waive that case by case.

Comparing the options for a child

If the money is paid to the estate instead, it is a refund of premiums only if a qualifying survivor is a beneficiary of the estate and the legal representative and the survivor jointly file Form T2019. Otherwise the whole value is income on the final return.

Tax withheld on a lump sum may not cover the tax actually owing, because the withholding rate is not the tax bracket rate, and the balance is payable when the income is reported on the return. A person who is not the annuitant and receives an RRSP amount can be jointly and severally liable with the last annuitant for the part of the tax attributable to that amount, so beneficiaries can be pursued for the tax if the estate cannot pay.

What to do next

• Check that your RRSP or RRIF names the right beneficiary, and read your will.
• Confirm whether your child already has an RDSP, and who is the plan holder.
• Ask the plan issuer how it handles an RDSP transfer.
• Keep records of your child's income and how you supported them.
• Mark the 60-day deadline after year end.
• Talk to a lawyer or accountant about how the rollover fits with the rest of your estate.

Frequently asked questions