I wrote this in 2009 this just after the RDSP (Registered Disability Savings Plan) program started. It was before any bank had announced what they were doing about it. The program continues to evolve in terms of rules and regulations. Not all banks or financial institutions offer the program.
This new savings vehicle introduced by the Government has taken a while to appear as a Product in the banks. I checked with TD for a time, but they have finally come out with their version of the RDSP (in 2009) ( Registered Disability Savings Plan ).
This delay is a bit frustrating given the speed shown to get the TFSA vehicles in place for TD. BMO had an RDSP vehicle available for a while. It almost caused me to move my banking services, and may still yet. It was a BMO Mutual Funds product, so less attractive to me.
Who is Eligible for the Registered Disability Savings Plan ?
The Government’s explanation is simple enough:
- is eligible for the disability amount;
- has a valid social insurance number (SIN);
- is a resident in Canada
- is under the age of 60. This age limit is not applicable when a beneficiary’s RDSP is opened as a result of a transfer from the beneficiary’s prior RDSP.
The first point is the most significant. The RDSP recipient must have a DTC from the CRA. That means you must have filled in a T2201 Disability Tax Credit Certificate and had it approved by the Government. Once that is in place, then you can start looking at the RDSP.
What is an RDSP?
That’s a good question. I think it is worthwhile reading over the Government’s information on the program. A quick synopsis from their website is a good starter:
A registered disability savings plan (RDSP) is a savings plan to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit (disability amount). It is a very long-term savings vehicle.
Contributions to an RDSP are not tax-deductible. The RDSP is different from the RRSP in this way. Contributions are after-tax money. Contributions can be made until the end of the year in which the beneficiary turns 59 years of age. Contributions that are withdrawn are not included as income for the beneficiary when paid out of an RDSP. However, the Canada disability savings grant, Canada disability savings bond and investment income earned in the plan will be included in the beneficiary’s income for tax purposes when paid out of the RDSP.
So a valuable vehicle for parents with disabled kids worrying about how their kids will thrive or survive financially in the future.
Benefits of the Program
There is no limit to the amount of money put into an RDSP in a particular year. There is, however, a $200,000 lifetime limit in place per person.
The benefit of putting money in this type of savings vehicle is that the Government will pay matching grants of 300, 200 or 100 percent of the value-added, depending on the family’s income level. Thus someone whose net income is less than $34000 would get $3 more for every $1 put into the program because someone who has net income over $77000 now will get $1 more for every $1 put into an RDSP.
For folks with disabled loved ones, this is another way to help out financially, and I am glad to see that TD is finally getting on board with the program.