Did you know?
1. The federal government will contribute up to 100%, 200% or 300% with each annual contribution to a RDSP, with a lifetime limit of $70,000 in grants and $20,000 in bonds.
2. Contributions can be made, by either the beneficiary of the plan, a holder of the plan or a third party (friend/family member), and until the end of the year that the beneficiary turns 59. Contributions to a RDSP are not tax deductible.
3. For individuals / families who may not be able to contribute to the savings plan, and have incomes below $20,883, Canada Disability Savings Bonds (CDSB) will be contributed to the savings plan in the amount of $1,000 annually, for twenty years or until the beneficiary turns 49. The lifetime limit for CDSB is $20,000.
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What is the Registered Disability Savings Plan (RDSP) ?
The RDSP was introduced under the 2007 federal budget for those who qualify
for a Disability Tax Credit. It is a special type of savings account sponsored by
the Canadian government. Under the program, the government will provide
annual assistance in the form of matching grants up to $3,500 per year and bonds up to $1,000 per year.
Who is a RDSP account for?
A RDSP is ideal for parents of disabled children or disabled adults under 60 years of age. In order to setup a RDSP, the beneficiary (person who the account is for) must have a previously approved Disability Tax Credit (DTC) or have an active DTC application on file with the CRA. The beneficiary must also have a valid Social Insurance Number (SIN).There may only be one beneficiary per plan, and that individual may only have one RDSP plan.
Payments from the plan can only be made payable to the disabled beneficiary.
Who can contribute to the RDSP?
Anyone. (with written permission from the beneficiary)
What does it do?
The RDSP helps individuals with a disability start saving for a financially stable future while allowing for withdrawals/payments for immediate use (subject to assistance holdback rules and fair market value calculations.). Unlike other disability assistance, there are no restrictions placed on the beneficiary on what he or she uses the RDSP payments for.
Any money that is contributed to the RDSP is not tax-deductible for the contributor and not taxable for the beneficiary. Any earnings in the RDSP accrue on a tax-deferred basis and the beneficiary is taxed only when payments are received from the plan.
There are 2 payment types from the RDSP:
- Disability Assistance Payments (DAP)
General payments from the plan, including lump sum payments.
The beneficiary can request and receive payments from the plan
with flexibility.
- Lifetime Disability Assistance Payments (LDAP)
Annual payments – once started they must continue to be paid
out at least once per year. They must begin by the end of the
year in which the beneficiary turns 60. Payments are subject to
yearly maximum withdrawal amounts.
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RDSP amounts will not affect eligibility for provincial disability benefits in most provinces, such as B.C.’s PWD and Ontario’s ODSP.
In addition, RDSP amounts or payments from the RDSP will not affect the disabled beneficiary’s claims for i) GST credits, ii) Canada Child Tax Benefits, or iii) Old Age Security payments.
How does ATG help?
- Ensure the beneficiary of the account is first approved for the DTC
- Provide guidance in regards to applying for Bonds/Grants
- Provide guidance towards maximizing contributions
- Provide guidance in regards to available options for Trustees (Banks) who issue RDSPs
- Support with the completion of third-party forms
Please keep in mind that the above is provided for general information purposes only and is inherently limited in scope. ATG does not provide investment advice. More information is available through Canada Revenue Agency and any participating financial institution. |
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