How to Complete RC4625 RESP to RDSP Rollover

When a child or young adult with a disability is unable to pursue post-secondary education, the funds accumulated in a Registered Education Savings Plan (RESP) may seem stranded. Fortunately, Canadian tax rules allow the income portion of an RESP to be rolled over into a Registered Disability Savings Plan (RDSP) under certain conditions, avoiding the punitive taxes that would otherwise apply. Form RC4625 facilitates this rollover.

Background: RESP and RDSP Basics

A RESP is a tax-sheltered savings plan for a child's post-secondary education. Contributions grow tax-free, and the government provides matching grants through the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). A RDSP is a long-term savings plan for individuals with disabilities who are eligible for the Disability Tax Credit. The government provides the Canada Disability Savings Grant and Canada Disability Savings Bond for eligible individuals.

When a RESP beneficiary cannot attend post-secondary education due to a disability, rolling the RESP income into their RDSP redirects those savings toward long-term financial security without punitive tax consequences.

Eligibility for the Rollover

All of the following conditions must be met:

• The RESP beneficiary is also the beneficiary of an RDSP (or becomes one before the rollover).
• The RESP beneficiary is eligible for the Disability Tax Credit with a valid T2201 on file with the CRA.
• The RESP has been open for at least 10 years, OR the beneficiary is at least 21 years old.
• There are no other eligible RESP beneficiaries who could use the funds for education, or all beneficiaries are at least 21 and not currently enrolled in qualifying education.
• The RESP is being collapsed (closed) in connection with the rollover.
• The rollover amount does not exceed the available RDSP contribution room (lifetime limit of $200,000 minus previous contributions).

What Can Be Rolled Over

Understanding the components of a RESP is essential:

• Contributions: The original money put in by the subscriber. These are returned to the subscriber tax-free when the RESP is collapsed.
• Government grants (CESG and CLB): These must be returned to the government when the RESP is collapsed if the beneficiary did not pursue qualifying education.
• Accumulated income: The investment growth earned inside the RESP. This is the portion that can be rolled into an RDSP using Form RC4625.

Without the rollover, the accumulated income would be subject to regular income tax plus an additional 20% penalty tax if withdrawn as an Accumulated Income Payment (AIP). The RC4625 rollover avoids both of these taxes on the transferred amount.

How to Complete Form RC4625

Step 1: Obtain the Form

Download Form RC4625, "Rollover from a Registered Education Savings Plan to a Registered Disability Savings Plan," from the CRA website.

Step 2: Complete Section 1 (RESP Information)

Enter the RESP contract number, the name and address of the RESP promoter (financial institution), and the name and SIN of both the RESP subscriber and beneficiary.

Step 3: Complete Section 2 (RDSP Information)

Enter the RDSP contract number, the name and address of the RDSP issuer, and the name and SIN of the RDSP beneficiary (must be the same person as the RESP beneficiary) and the RDSP holder.

Step 4: Specify the Rollover Amount

Enter the amount of accumulated income being rolled over. This cannot exceed the available RDSP contribution room.

Step 5: Obtain Signatures

The form requires signatures from the RESP subscriber, the RDSP holder, and representatives of both financial institutions.

Step 6: Process the Transfer

Submit the completed form to both financial institutions. The RESP promoter processes the withdrawal and the RDSP issuer accepts the deposit. Funds transfer directly between institutions; you do not receive the money personally.

Tax Implications

The primary benefit is avoiding the tax and penalty that would otherwise apply to RESP accumulated income:

• The rolled-over amount is not included in anyone's income at the time of transfer.
• The 20% additional tax on Accumulated Income Payments does not apply.
• When funds are eventually withdrawn from the RDSP, they will be taxed as income to the beneficiary, who is likely to have a lower income and therefore pay less tax.
• The rollover amount reduces the RDSP's available contribution room, which may affect future Canada Disability Savings Grants.

What Happens to Government Grants

When you collapse a RESP, unused CESG and CLB amounts must be returned to the government. The grants cannot be transferred to the RDSP. Only the accumulated income is eligible for rollover. The original subscriber contributions are returned directly to the subscriber and are not taxable.

Preparation Steps Before Filing

• Ensure the beneficiary has an approved T2201 on file with the CRA.
• Open an RDSP for the beneficiary if one does not already exist.
• Calculate the RDSP contribution room ($200,000 lifetime limit minus previous contributions).
• Contact both financial institutions to confirm they can process the rollover.
• Confirm the RESP meets the closure conditions.

Related Resources

• Guide to T2201 Disability Tax Credit Certificate
• How to Fill Out T3012A for RRSP Excess Contributions
• Guide to T1 Schedule 1 Federal Tax Calculation
• How to Apply for the Canada Child Benefit
• How to Fill Out BC428 Provincial Tax Credits

Frequently Asked Questions

Can the RESP subscriber and RDSP holder be different people? Yes. Both must sign the RC4625 form, but they do not need to be the same person.

Is there a time limit? The rollover must be completed in connection with the collapse of the RESP. Coordinate with both institutions to process it promptly.

What if the RDSP beneficiary is a capable adult? They can serve as both the RDSP beneficiary and holder. If they are unable to manage their finances, a legal representative serves as the holder.

Can I do a partial rollover? The rollover is specifically for the accumulated income when the RESP is being collapsed. You cannot keep the RESP open for other purposes while doing a partial transfer of the income portion.

Final Thoughts

Form RC4625 provides a valuable tax-efficient pathway for families who saved for education through an RESP but need to redirect those funds to support a beneficiary with a disability. By rolling the accumulated income into an RDSP, you avoid punitive tax treatment and redirect savings toward long-term financial security. Work with your financial institutions and consider consulting a financial advisor to ensure the rollover is handled correctly.

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