What is an RDSP?
The Registered Disability Savings Plan (RDSP) is a tax-deferred savings vehicle introduced by the government to help Canadians with disabilities and their families save for their long-term financial security.
A Canadian resident who’s eligible for the Disability Tax Credit (DTC), which we learned about in last week’s blog post, then also becomes eligible for an RDSP.
There is no annual limit on amounts that can be contributed to an RDSP, however the overall lifetime limit is $200,000 per beneficiary. Contributions are permitted until the end of the year in which the beneficiary turns 59 years old.
- To qualify for an RDSP, you must:
- Be eligible for the Disability Tax Credit
- Be a resident of Canada
- Be less than 60 years of age
- Have a valid Social Insurance Number (SIN)
Grants and Bonds
In addition to personal contributions, the government offers assistance through the Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs). A beneficiary is eligible for CDSGs and CDSBs until the end of the year in which the beneficiary turns 49 years old, and you may carry forward unused grant and bond entitlements for a 10-year period.
CDSGs are annual matching federal grants deposited into a beneficiary’s RDSP to help build long-term savings. The grants are based on the amount contributed and family net income, and there is a lifetime CDSG limit of $70,000 per beneficiary.
Lower-income families may also qualify for Canada Disability Savings Bonds (CDSBs). The government can deposit up to $1,000 a year to a RDSP, even if no contributions are made into the plan. For a minor beneficiary, family net income is that of his or her parents. For an adult beneficiary, family net income is that of the beneficiary and his or her spouse, if applicable. CDSB payments are subject to a lifetime limit of $20,000 per beneficiary.
Disability assistance payments (DAPs) are any payment from an RDSP to the beneficiary (or to their estate after their death). It is a singular payment that can be requested at any time and may consist of contributions, grant, bond, proceeds from rollovers and income earned in the account.
Lifetime disability assistance payments (LDAPs) are DAPs that, once started, must be paid at least annually until either the plan is terminated or the beneficiary has died. These payments must begin by the end of the year in which the beneficiary turns 60 and are subject to an annual withdrawal limit determined by a set formula.
Payments from an RDSP don’t affect other income-tested federal government programs, including:
• Old Age Security (OAS)
• Guaranteed Income Supplement (GIS)
• Canada Pension Plan (CPP)
• Goods and Services Tax Benefit (GST Benefit)
• Social assistance benefits
Generally speaking, RDSP assets and payments shouldn’t have a negative impact on eligibility for programs such as subsidized housing and long-term care. However, each province and territory has its own program that provide support to persons with disabilities, so be sure to check for the most up-to-date legislation in your jurisdiction.
Talk to Statera Financial Planners today about RDSPs and how your family may benefit; it’s currently the least utilized tool available to those living with a disability and can provide some proper stability to a beneficiaries financial future!