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TD Direct Investing RDSP Deposits

I write specific articles yearly as an update on previous reports. Not many things change in my financial world. Unfortunately, my ability to deposit in my son’s RDSP is one of those.

Some of my yearly rants:

RDSP Deposit for a TD Direct Investing Account

For those unsure, let me recap. I cannot make a deposit directly to my son’s RDSP (a TD Direct Investing account). I must first put money in my Direct Investing trading account. Once the money is in the trading account, I must call Direct Investing phone service to transfer the funds to my son’s RDSP.

RDSP
The Route for Money to My Son’s RDSP

Over the years, I have had many reasons given. I received an update from someone who has an RDSP where my son is the beneficiary, who can direct deposit to that account. I was confused by this policy, so I continued investigating yearly to Direct Investing why I could not make the deposit.

This year’s response follows:

Only the account holders can transfer cash to the RDSP account.

This would be the same for any registered plan account.

Due to online privacy and security concerns, trade and account related inquiries are handled by our investment representatives. By phone, we can securely access your profile to assist accordingly. If you feel that the representative has not adequately addressed your concern, you may ask to speak with a Manager.

Response from TD Direct Investing

This statement lines up with what I have found out. It does not make me very happy, as I think I can quickly deposit into any RESP directly. I did that for my daughters and am doing it for my son as well.

New Tactic?

Given my son now has a TD savings account, I will test the validity of this explanation. I will attempt to set up a transfer to his RDSP. I will also need to file his taxes for next year, but that is for another story.

Addendum, I forgot that two smart folks Bobby Vu and Steven Reeves, last year, commented that I could try “Paying it as a Bill.” The plan would entail setting up a bill payment to TD Direct Investing with my son’s RDSP account number. I have set this up and it works. I am able to deposit directly to my son’s RDSP.

Previous Discussions on Topic

  • 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 getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank or such, but how is that done? It is not as easy as you might think. This page outlines many of the issues that have arisen for my family working with an RDSP account.
    • Disability Tax Related Topics
      Thanks for 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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Changes to Disability Tax Credit

The proposed 2021 Federal Budget has possible changes to how disabilities are evaluated. Specifically, “…update the list of mental functions of everyday life that is used for assessment for the Disability Tax Credit…”. When I first read the statement, I worried this was an attempt to shrink the pool, but I have been assured this is not the case.

A portion of the statement is as follows:

To help more families and people living with disabilities access the Disability Tax Credit, and other related support measures like the Registered Disability Savings Plan and the Child Disability Benefit: 

* Budget 2021 proposes to update the list of mental functions of everyday life that is used for assessment for the Disability Tax Credit. Using terms that are more clinically relevant would make it easier to be assessed, reduce delays, and improve access to benefits.

* Budget 2021 also proposes to recognize more activities in determining time spent on life-sustaining therapy and to reduce the minimum required frequency of therapy to qualify for the Disability Tax Credit. To ensure these changes enable applicants to have a fair and proper assessment of their eligibility for the Disability Tax Credit, the government will undertake a review of these changes in 2023.

It is estimated that, as a result of these measures, an additional 45,000 people will qualify for the Disability Tax Credit, and related benefit programs linked to its eligibility, each year. This represents $376 million in additional support over five years, starting in 2021-22.

Part 3: A Resilient and Inclusive Recovery

It is the final line of that statement that makes me less paranoid about this.

Caveat Disability Tax Credit

As with previous changes, these will not come into play until after the Budget (2021) is passed by parliament. What the results of the review ends up doing, remains to be seen. My concern is still with the “…Using terms that are more clinically relevant would make it easier….” phrase. This suggests the Doctor filling in the T2201 forms will need to know the correct vernacular for the forms.

  • 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 getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank or such, but how is that done? It is not as easy as you might think. This page outlines many of the issues that have arisen for my family working with an RDSP account.
    • Disability Tax Related Topics
      Thanks for 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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RDSP Grant Entitlement Statement 2021

Every year, an RDSP holder gets an update about how much money can be put into their RDSP. The Statement of Grant Entitlement, says how much money and how much the government will match, with a Grant.

RDSP Grant Entitlement 2021
RDSP Grant Entitlement 2021

As you can see this is an important piece of information. I now know, in 2021, I can deposit $1000 in my son’s RDSP and it will be matched with $1000 in grants.

This amount will increase once my son is over the age of 17, as the income they will use to determine the grant will be his income, instead of our household income. When he turns 18, his grants should be much higher, due to his estimated income at that age.

When he turns 18, my son will also have to re-qualify for his Disability Tax Credit as well. This is what we learned from the last time he had to re-qualify. Luckily the rules if he should not get a DTC right away, have changed.

Previous Posts on Grant Entitlements

  • 2020 Statement of Grant Entitlement
  • 2019 Statement of Grant Entitlement
  • 2018 Grant Discussions

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RDSP after DTC Lost

Federal Budget 2019 announced that loss of DTC would no longer be a reason to close a RDSP and repay grant and bond.  The budget also stated that the measure would start as of budget day, March 19, 2019.  Any plan that had not yet been closed due to loss of DTC as of the budget, could remain open in the interim until the measure became law.

The legislation had been drafted, and was to be part of Budget 2020 in late March.  However, there was an interruption, and the budget was never tabled.  This interim measure remains in effect until January 1, 2021.

RDSP holders who lose DTC eligibility

As of the 2020 Fall Economic Fiscal statement this has been clarified. The new rules come into force or are deemed to have come into force on January 1, 2021.

How does it work?

If a beneficiary loses DTC before the end of the year they turn 59, the plan can remain open but contributions are no longer allowed to be made nor is grant or bond paid.  The loss of DTC also sets the AHA window (Assistance Holdback Amount window) , which becomes ten years prior to loss of DTC.

If the loss happens before the end of the year the beneficiary turns 50, the AHA period is the ten previous years from Jan 1.  It remains this period until Jan 1, of the year the beneficiary turns 51, when it becomes 9 years; Jan 1 of the year the beneficiary turns 52, 8 years; and so on.  The end of the year the beneficiary turns 59 (Jan. 1 of the year the beneficiary turns 60) it becomes zero.

So, if you lose your DTC at age 35, and wish to take out money from your RDSP (before you turn 60), there are penalties.

Early RDSP Withdrawal Graphic
You Lose A Lot With an Early RDSP Withdrawal

Whenever you take money out of the plan, you will be subject to one of the following repayment rules:

1) return $3 of government grant and bond for every $1 that you withdraw from the plan (proportional repayment rule), or

2) return all the government grant and bond you have received in the AHA Window Period; whichever of these two amounts is less.

From RDSP: A Very Long Term Savings Plan

If the beneficiary loses DTC the year they turn 51 or older, the AHA is the ten prior years from Jan. 1, and each subsequent year it is the ten years prior to Jan. 1, until the end of the year the beneficiary turns 59 (Jan. 1 of the year the beneficiary turns 60), when it becomes zero.

What Happens to the Funds?

While there is an AHA amount, it is repaid if the plan is closed or the beneficiary dies, and any withdrawal triggers a repayment at 3 to 1 up to the amount of the AHA.

The year the beneficiary  turns 60, LDAPs commence as normal.

Why the Change?

One of the reasons for this change in rules is there is an assumption about the DTC Holder. Given the person with the DTC qualified once, they may be able to re-qualify for the DTC at a later date.

Complicated?

Yes, as I have said before, this system is complicated, but still vital.

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Specified Disability Savings Plan – SDSP – How Does it Work ?

Let me preface this with, this stuff is complicated. I have read over the documentation, and this is my interpretation of what I have read. While it is important to have rules to ensure systems are not abused, this is a bit extreme. The SDSP (Specified Disability Savings Plan) is one of the exceptions possible in the RDSP program, keep that in mind. If you are unsure, call for help.

The Registered Disability Savings Plan (RDSP) has strict rules for withdrawals. The rules ensure that the RDSP “…cannot be used like a chequing account…”. That was a direct quote from an ESDC source.

I will be writing more about this, in the near future.

The rules for withdrawals are:

“Whenever money is withdrawn from an RDSP, all or part of the grants and the bonds that have been in the RDSP for fewer than 10 years must be repaid to the Government. You must repay $3 for every $1 that is taken out, up to the total amount of grants and bonds paid into the RDSP in the last 10 years. Repayments to the Government of Canada will be applied starting with the oldest grants and bonds paid into the plan first, and then towards the newest.”
ESDC RDSP Withdrawal page

Specified Disability Savings Plan SDSP

The specified disability savings plan SDSP, is a clause in the RDSP for disabled people with a shorter life expectancy. It allows families dealing with the imminent death of a loved one to extract money (early) from an RDSP (without penalties).

To get an SDSP, the beneficiary must have an RDSP.  A Doctor must attest the holder of the RDSP will most likely die within 5 years. The RDSP holder then must elect to convert their RDSP to an SDSP, and ESDC must approve this election.

Once the RDSP changes to an SDSP no further money can be deposited in the account. If money is deposited, the SDSP will revert back to an RDSP. In this instance all associated early withdrawal penalties, would come into play.

The maximum that can be taken out per year from the fund is $10,000.

This is one of the few exemptions for taking money out of your RDSP early. Remember the RDSP is a very long-term savings vehicle.

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