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Pensions and Disabled Children


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

I read about an exciting change to the pension system offered to employees at the University of Waterloo. The change outlines a New cash-out rule in the pension plan. The University was stopping employees from being able to withdraw their funds if they took early retirement. They must then leave the funds in the pension plan. The exciting idea. Anybody who wishes 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 money 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 fascinating 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. 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. I don’t think that is likely, but it would be an interesting scenario to see, in my opinion.

My pension does have in its survivor a benefit for children. With a disabled child, this benefit continues on. It is 25% of the monthly Pension Payout. Something I must look into further.

A Disabled Child Haiku

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

  • The RDSP Page is the Overview of all articles I have written about the RDSP (including DTC and other areas).
    • RDSP : Laying the Ground Work (first things first)
      What needs to be done BEFORE you can apply for a Registered Disability Savings Plan? A major aspect of this is the Disability Tax Credit (DTC). Make sure you click on this page to get started.
    • RDSP : Working with The Account
      Now that you have succeeded in getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank, but how is that done? It is not as easy as you might think. This page outlines many issues that have arisen for my family working with an RDSP account.
    • Disability Tax Credit Related Topics
      Thanks to my RDSP and DTC work I then had to learn a great deal about the tax implications of having a disabled child.
    • Autism Specific Articles
      Being the proud Father of a child on the Autism Spectrum, I also ended up writing a great deal about Autism specific things as well.

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