The Registered Education Savings Plan (RESP) to Registered Disability Savings Plan (RDSP) rollover is used when a disability prevents the beneficiary from attending post secondary school. Normally, the parent can withdraw the earnings as an Accumulated Income Payment (AIP), which counts as regular income, plus a 20% penalty. By rolling the AIP into an RDSP, the 20% penalty is waived, and the tax is deferred until the beneficiary eventually withdraws money from the RDSP.
To be eligible for the rollover in 2026, one of the following conditions must be true…
- The RESP must have been opened for at least 10 years and the beneficiary must be at least 21 years old and not in school, OR
- The beneficiary must have a severe and prolonged mental impairment that prevents them from attending post secondary education, OR
- The RESP has reached its 35 year lifespan limit.
Can all portions of the RESP be rolled over?
Money inside the RESP is divided into buckets.
Bucket A: Personal Contributions – This money is returned to the parent/subscriber tax free and cannot be rolled over.
Bucket B: Government Grants & Bonds (CESG/CLB) – Grants and bonds must be returned to the government and cannot be rolled over.
Bucket C: Investment Growth – Any interest, dividends, or capital gains earned inside the plan. This is the only portion of the RESP that can be rolled over into the RDSP.
How do roll overs affect RDSP contributions?
Rolled over RESP funds do not trigger matching grants from the government. The rollover does counts toward the RDSP $200,000 lifetime contribution limit, and must be completed by December 31st of the year the beneficiary turns 59.
How is the rollover processed?
CRA form RC435 must be filled out to rollover from an RESP to an RDSP.
The form can originate either from the RESP promoter (the relinquishing financial Institution) or the RDSP issuer (the receiving institution). The RESP must be closed by March 1st of the year following the year in which the first AIP (rollover) was paid.