Your RDSP is at risk if you have to reapply for the DTC

January 18, 2018

Your RDSP will be terminated if you lose the DTC unless you take steps to protect your investment.

If you are denied the DTC when asked to reapply for the tax credit, you have a limited timeline to appeal the decision.  Otherwise, the RDSP will be terminated with devastating financial consequences.

CRA requires an Election to be filed by the financial institution holding the RDSP before the end of the year following the year that the beneificiary is no longer eligible for the DTC. 

In order to ensure that the RDSP remains open during the appeal process, the holder of the plan is required to submit a letter to the financial institution (issuer of the plan) from a licensed medical doctor, certifying in writing that the beneficiary is likely to become eligible for the DTC at some point in the future because of the disabling effects of the patient’s mental or physical impairment.

The doctor's letter is submitted to the financial institution which will complete the Election form, signed by the issuer and the holder of the plan, and submit it to the Employment and Social Development Canada. Otherwise, the financial institution will be required to terminate the RDSP if the DTC is not reinstated before December 31st of the year following the first year for which the beneficiary is no longer eligible for the DTC, that is, the taxation year under appeal.

The Election will be valid until the end of the fourth calendar year following the first full calendar year for which a beneficiary was disallowed the DTC.

If a beneficiary becomes eligible for the DTC while an election is valid, the usual RDSP rules will apply commencing with the year for which the beneficiary is eligible.

No contributions can be made to the RDSP while it is on hold.


John (the beneficiary) has been eligible for the DTC from birth to 2015 because of the disabling effects of autism and ADHD. John’s mother (plan holder) set up an RDSP for her son in May 2011.

CRA asked John to reapply for the DTC for the 2016 tax year. CRA denied the claim and John’s mother appealed the decision.

The appeal processes may take considerable time so the mother asked her son’s doctor to write a letter, stating that in his/her professional opinion, as a medical doctor, John is likely to become eligible for the DTC in the future because of the severity of his medical condition.

The mother takes the doctor's letter to the financial institution holding the RDSP, where the agent completes the Election Form, signed by John’s mother and the agent.  The agent will notify Employment and Social Development Canada that an Election has been made to keep the RDSP on hold.

If there is a decision to reinstate the DTC for the 2016 tax year, John’s mother will take a copy of the Notice of Redetermination to the financial institution to activate the RDSP effective the 2016 tax year.

If there is no decision to reinstate the DTC for the 2016 tax year, the RDSP will remain on hold until 2020, allowing John to reapply for the DTC. However, there will remain a gap in contributions until the DTC is approved.

If you have any questions, contact CRA's RDSP helpline at 1.866.204.0357.