RDSP Update: Nice Payback

by bigcajunman last updated on September 21, 2017

My parents gave us some money for him, and we decided the best course was to put the money away in his RDSP (Registered Disability Savings Plan), and we were very pleased with the results.

The Circle of Savings in Canada

For the RDSP the Government’s kick in was about 2.25 times the money we had put into the account (not 2.25 %, but double plus another quarter of what we had deposited). Thanks to our family income being higher than average we did not get to take advantage of the full bursary which could be:

The Government provides matching grants of up to 300%, depending on the amount contributed and the Beneficiary’s Family Income

This is a limited grant, remember also:

The maximum grant is $3,500 each year, with a limit of $70,000 over your lifetime. Grants are paid into the RDSP until the end of the calendar year in which you turn 49 years old.

If you don’t have enough money remember even if you just put a little money in it you might be able to get a Canada Disability Savings Bond where the government will kick $1000 in a year if you qualify (free money!). Read the RDSP web page to see if you qualify.

Is This Reason Enough?

If there is any question whether this might be a good idea for a parent of a child with a disability, this is the reason. Yes the bursary value is capped, and does have a maximum amount pay out, but if you are not taking advantage of this help from the government you really need to rethink your plans. This is money that will help plan for your disabled child’s future, go do it now!

originally published on April 11, 2013 { 14 comments }

Christine November 14, 2013, 1:41 PM

Hi There! My son was recently diagnosed with ASD, Level 1 and has received the Disability tax credits/benefits and we are now eligible to buiy him RDSPs. I am somehow confused by it. I have been buying RESPs for years not knowing if he will ever go to post secondary, but hoping that he will. With the RDSP, will he be able to withdraw for schooling if he is capable of going or will we lose all of the benefits. At what point/what reason will be be able to withdraw? I want to be sure that this is a good option before we signh up. God willing, I hope that he will be able to go to post secondary. How dies this work?

Blessings,
Christine

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- bigcajunman November 14, 2013, 2:42 PM
  
  Christine,
  
  The RDSP is a life savings plan, not just for schooling. I would read about it closer here: http://www.cra-arc.gc.ca/rdsp/ . If there is a chance of him going to school then keep up the RESP payments, I believe you can transfer that money into the RDSP FROM the RESP if it is not used: http://www.cra-arc.gc.ca/gncy/bdgt/2012/qa08-eng.html that was a budget change last year.
  
  Putting money into the RDSP now will pay out later in life (if your child remains “disabled” in the eyes of the CRA). Read those two links and get back to me with any more questions.
  
  Reply
- mj January 16, 2014, 6:39 PM
  
  Christine,
  
  we had similar situations 4yrs ago. My son was 6 at time and we had RESP with CST. We had about 5000 in RESP account. Same as you I realize i am taking risk here as my son may not go Uni. At that time there was no option of transfer from RESP-RDSP.
  My bigger worry was about $1500 admin fees that CST already charged us. When I called them & told we need to close account for this reason i was told i will get money-all admin fees (which are front loaded).
  After lot of frustrations I asked Ellen Roseman (prominent finance writer/blogger) if she can help me. Sure enough she shot email to CST, i got message from CST to call them back & they asked me write them my reasons through email and once done they were candid enough to refund me whole amount without any fees/penalty.
  Just wanted to share here!!
  
  Reply
Barb April 15, 2013, 7:57 PM

Great to hear your son’s grandparents gave you some cash to put towards the RDSP. I was wondering how your quest to catch up the govt contributions was going 🙂

Reply
- bigcajunman April 16, 2013, 4:42 AM
  
  Some Christmas money that he can unwrap the gift later on in life.
  
  Reply
Big Cajun Wife April 11, 2013, 5:26 PM

@Susan If you wish to have someone maintain control, you would need to look into a Henson Trust,
A Henson trust (sometimes called an absolute discretionary trust), in Canadian law, is a type of trust designed to benefit disabled persons. Specifically, it protects the assets (typically an inheritance) of the disabled person, as well as the right to collect government benefits and entitlements.
http://www.reena.org/sites/default/files/InformationBrochures/hensontrust.pdf

Big Cajun Wife.

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Bet Crooks April 11, 2013, 9:54 AM

I’m glad the government is providing a small amount of assistance, but I think they really could and should do more. Kudos to you for finding the time to chase the paper to get this done. I worry that many people who need this type of assistance are not getting it because they cannot get the paper work done because of the stress/time commitment of caregiving, and the unnecessary complexity of the program requirements. (not every parent has post-secondary education) I think the government could be way more proactive and go out and help people sort these things out. After all, it’s in everyone’s best interest to provide a proper future to every Canadian.

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- bigcajunman April 11, 2013, 10:37 AM
  
  They are starting to get the hint with a few other tax breaks, but as usual if you are in the “middle class” (I think I am there, but I am not sure) a lot of the programs disqualify you because you make just a bit too much money.
  
  Reply
- Susan April 11, 2013, 3:19 PM
  
  Hi I don’t think the program is that complicated is it? My current concern is how to allow parents of adult children with psychiatric diagnosis to retain some control over the account. Like being able to appoint a trustee rather than name the recipient directly as holder.
  
  Reply
  - bigcajunman April 11, 2013, 3:57 PM
    
    I haven’t seen anything like that, but would a power of attorney not help in that situation?
    
    Reply
Susan April 11, 2013, 8:14 AM

Is it not better to wait until child is 18 to access maximum govt funds.

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- bigcajunman April 11, 2013, 10:36 AM
  
  I hadn’t read that it would be better to wait, I’ll have to go look that one up.
  
  Reply
- RDSP Specialist (AB) April 16, 2013, 6:19 PM
  
  Saving money is always best done early. Yes, if you only want to put in $30,000 to max out on the $70,000 in grants available over 20 years, then waiting until the person is 18 is the way to go. However, if your family had income over the threshold amount to only, I use “only” loosely as, you are still getting a 100% return on your investment with gov’t grants, over say those first 18 years you would be way better off putting in the extra $10,000 that would be needed to max out the grants, than to wait 18 years to start.
  
  Someone once said, the best time to plant an oak tree was 20 years ago, the second best time is right now. I advise all of my RDSP clients to put enough money in to max out the grants available to them right now. For example, starting early, assuming a 2% annual return on investment, would result in the beneficiary having $206,910.37 in their account at age 47. Wait until they are 18 to start and that number drops down to $181,264.35. Even with the extra $10,000 that would have to be invested to get the early grant money, that still puts you ahead over $15,000. And remember that is only at a 2% return.
  
  Reply
  - bigcajunman April 16, 2013, 6:49 PM
    
    Funny, that is the same thing my golf teacher says to me about my golf game, “If you really want to improve, you should have started playing when you were 15″…
    
    Reply