Pensions and Disabled Children

in Child Tax Credit, Disability Insurance, RDSP, Retirement Savings

From RRSP to RDSP

The government announced a clarification in their last budget outlining how it would be possible for the estate of a deceased parent to be able to transfer the contents of their RRSP to their disabled child’s RDSP, tax-free. This strikes me as an eminently sensible idea, because it helps families with disabled children save for the day when Mum and Dad aren’t around any more, and can give the parents a little more peace of mind about the future of their disabled child.

Given this is now the case I then read a very interesting change to the pension system offered to employees at my Alma Mater, the University of Waterloo, which outlines a New cash-out rule in pension plan. What the University was doing was stopping employees from being able to withdraw their funds if they go for early retirement (but in fact it is a severance, not a retirement), they must then leave the funds in the pension plan. Interesting idea, anybody wishing to comment on that please go ahead.

The more interesting point was the exception that they added:


….However, this option will continued to be available after January 1, 2014 to members who retire between ages 55 and 65 and at the time of retirement have a child who is eligible for the impairment credit under the Income Tax Act. …

So if you have a disabled child, and wish to take out the commuted part of your pension moneys and plan on putting it into a LIRA or RRSP with the idea of then being able to take that money and leave it to your disabled child (tax-free), this exception remains.

A very interesting idea, I am open to anyone who wishes to comment yea or nay about this specific idea or about the Government’s changes to the ability of parents to pass money tax-free to their disabled children.

I am also curious to see whether this kind of idea for private pension plans may come into play more, or even more interestingly an ability to transfer some part of a pension from a deceased parent to a disabled child, the same way it is done for the spouse of a deceased Pension member. Don’t think that is likely, but it would be an interesting scenario to see, in my opinion.

A Disabled child Haiku


Much worrying now
Will there be enough for them?
When I am not there?

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