A while ago I spoke with Tom Drake at Maple Money about the DTC and RDSP. After some judicious edit’ing Tom has published the Podcast here. As usual you can read about the RDSP on my Registered Disability Savings Plan page.
For those unaware there are a bunch of very smart folks that I use for research on this topic (my wife being a major contributor), and whenever I do one of these talks, I get a few things not quite right (and this is no difference). My source at ESDC (who is very patient and kind) points out a few of my fumbles: I mention that the program is 10 years old, it was started in 2008, so that is a 12 years in 2020.
RDSP and Bankruptcy
Doug Hoyes and I have discussed (on his Podcast) about the topic of RDSPs and bankruptcy, but my source now states clearly:
“The Bankruptcy Act was changed last year through the Budget Implementation Act. See 67(1)(b.3) of the Insolvency and Bankruptcy Act.”ESDC Source
134 Paragraph 67(1)(b.3) of the Act is replaced by the following:(b.3) without restricting the generality of paragraph (b), property in a registered retirement savings plan, a registered retirement income fund or a registered disability savings plan, as those expressions are defined in the Income Tax Act, or in any prescribed plan, other than property contributed to any such plan or fund in the 12 months before the date of bankruptcy,Bill C-97
RDSP After DTC Lost
If the beneficiary loses their Disability Tax Credit (DTC), it used to be that the RDSP had to be closed. I waffled around this one with Tom, but the actual answer is:
“As of Budget day 2019, a RDSP no longer is required to be closed due to loss of DTC. During a period when the beneficiary in not DTC eligible no contributions can be made to the plan except for the rollover of funds from a RRSP of a deceased parent or grandparent upon whom the beneficiary was dependent. During a period of DTC eligibility, the beneficiary will not accumulate annual grant or bond entitlements. The Assistance Holdback Amount will be determined as the ten year period immediately prior to the beneficiary being DTC ineligible, and will remain that period until the end of the year the beneficiary turns 50. Each subsequent year the AHA will decrease by a year. (51-9 years, 52-8 years,… 59-1 year). The year the beneficiary turns 60, the AHA is nil. Should the benficiary requalify for the DTC, the plan will operate as normal.”ESDC Source
So the money hangs around until the person turns 60 and then can be withdrawn, as Tom Drake pointed out should be the case.
Each time I talk about the Registered Disability Savings Plan and DTC I end up learning more myself.