What happens to an RDSP when the beneficiary dies?
When the beneficiary of an RDSP dies, the plan must be wound up, because an RDSP exists for one named person. Government grants and bonds paid in the previous 10 years generally return to the government. The remaining money, the contributions and any growth, is paid to the beneficiary's estate and handled through the estate.
This is the guide nobody wants to need. If you are reading it because someone you love has died, I am sorry for your loss. Please hear this first: nothing about an RDSP is urgent in the first days. Grieve, be with your people, and come back to the paperwork when you are ready. When that time comes, here is what happens, in plain English.
Why the plan cannot simply continue
An RDSP is built around one named beneficiary. The grants and bonds were paid for that person, the Disability Tax Credit approval was that person's, and the plan's rules all point at a single life. When that person dies, the plan has nobody left to exist for, so it is wound up and settled. It cannot be handed to a spouse, a sibling, or a child as a continuing plan. That is simply how the plan is designed.
The government money: the 10 year holdback
The part families worry about most is the government money, so let us be precise. Grants and bonds generally need to stay in the plan for 10 years. The total of grants and bonds still inside that 10 year window is called the assistance holdback amount. During the person's life, that rule shows up when money is withdrawn early. At death, it shows up in the settlement.
In plain terms: grants and bonds paid into the plan in the 10 years before the death generally go back to the government. Grants and bonds that have been in the plan longer than 10 years are past the holdback window, and they remain part of the plan's value. The government does not take back everything. It takes back the recent portion that had not yet cleared the waiting period.
Contributions and growth go to the estate
What remains after any holdback amount is returned belongs to the beneficiary's estate. That includes the contributions the family made over the years and the growth the plan earned. It is paid out to the estate and then handled the way estates are handled: under the person's will if there is one, or under provincial estate law if there is not.
One honest caution. The tax treatment of the final payout is an estate question, and estates have their own rules and filings. This is a moment for a good estate or tax professional who can look at the whole picture, not for guessing. The institution holding the plan can explain the settlement itself; the professional can help the estate handle what follows.
If payments had already started
Some beneficiaries die after their plan has started paying out, in the years when regular disability assistance payments are being made. The settlement follows the same shape. Payments stop, the holdback amount is worked out the same way, and what remains goes to the estate. Nothing about having started payments creates a penalty beyond the holdback rule itself.
Sorting this out while everyone is well
Most families meet this question in the hardest week of their lives, which is why a little planning ahead is such a gift. A will that names the RDSP, an executor who knows where the plan is held, and family who understand the holdback rule will all make a painful time simpler. That is executor planning, and it sits beside the separate question of what happens when the plan's holder dies or can no longer act, which is a different situation with a different answer: a successor holder steps in and the plan continues. I walk through holder succession and aging parent planning here.
The reverse question comes up too: how do you leave money to a person with a disability in your own will, safely? In Ontario, that is where Henson trusts do their work, sitting alongside the RDSP in a family's long term plan.
Your first step, when you are ready
Contact the financial institution that holds the plan and tell them the beneficiary has died. They will explain exactly which documents they need, usually including a death certificate and estate paperwork, and they will handle the settlement process from there. Take it one document at a time. You do not have to carry this part alone, and you do not have to rush it.
Common questions
Does the government take back all the grants and bonds when the beneficiary dies?
No. Grants and bonds paid into the plan in the 10 years before the death are the holdback amount, and that portion generally returns to the government. Government money that has been in the plan longer than 10 years stays part of the plan's value.
What happens to the contributions and growth?
After any holdback amount is returned, the remaining money, the contributions and the growth on everything in the plan, is paid to the beneficiary's estate. From there it is handled under the person's will, or under estate law if there is no will.
Can an RDSP be left to a spouse or child instead?
An RDSP belongs to one named beneficiary and cannot be passed to another person as a plan. Families who want to leave money behind for someone with a disability usually look at estate tools, such as a Henson trust in Ontario, alongside the RDSP.
What should our family do first?
Nothing needs to happen in the first days. When you are ready, contact the financial institution that holds the plan and let them know. They will explain the documents they need, usually including a death certificate and estate paperwork, and they handle the settlement from there.
See how this fits the bigger plan in the Disability Finance guide.
Sources: Disability Tax Credit, Canada Revenue Agency ยท Registered Disability Savings Plan, Government of Canada.
See where you stand: the free RDSP readiness checker takes about a minute and shows whether an RDSP belongs in your plan and what the government could add. No signup, and no pressure.
A quick note: this post is educational, not financial advice. For guidance on your own situation, book a free conversation. You don't have to figure this out alone. I'm here to help you through every step.