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Now the fourth national bank to begin offering RDSPs to Canadians, TD Canada Trust has announced that the RDSP is now available. With Scotiabank likely to come on board on November 23rd of this year, this will bring the total to 5 banks offering the RDSP nationally, and one local financial institution in Quebec. Currently, Bank of Montreal, Royal Bank of Canada, CIBC, TD Canada Trust, and FMOQ (Quebec) are all offering the plan, with totals nearing close to 20,000 accounts opened and nearly 40 Million distributed through Canada Disability Savings Grants and Canada Disability Savings Bonds.
Banks are now starting to become more streamlined around setting up the RDSP, and receiving Federal Government contributions into the plan. As many of you probably noticed, it has taken a while for everyone to get up and running for the RDSP program, and we are glad to see that all five national banks will be offering the plan by the end of the year.
In terms of investments, the TD Canada Trust RDSP allows TD Canada Trust GICs and term deposits, as well as the growth potential and flexibility of TD Mutual Funds. If you would like to view TD Canada Trusts information on the RDSP and visit their website you can go to http://www.tdcanadatrust.com/rdsp/index.jsp and browse.
If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com.
PLAN recognized Prime Minister Harper with it’s highest honour yesterday – an honourary lifetime membership – in recognition of the implementation of the Registered Disability Savings Plan. The Prime Minister was joined by Steven Fletcher, Minister of State for Democratic Reform, and Rick Hansen, President and CEO of the Rick Hansen Foundation at an event to raise awareness of Canada’s new RDSP. The event was hosted by the Burnaby Association for Community Inclusion.
To see video of Prime Ministers speech click on this link: http://vimeo.com/7339976
Excerpt from the official press release:
“While barriers still exist, people like Rick Hansen are a testament to what can be accomplished through courage and determination,” said the Prime Minister. “Through initiatives like the Registered Disability Savings Plan, our government is helping Canadians with disabilities make even greater contributions to our country.”
Click here for the entire Press Release
Rob Bromley, Chair of PLAN, Prime Minister Stephen Harper, and Jack Styan, Executive Director of PLAN at the announcement on the RDSP
Prime Minister Stephen Harper speaking at the RDSP announcement, with Rick Hansen, CEO, Rick Hansen Foundation and the Honourable Steven Fletcher, Minister of State for Democratic Reform
If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com.
The Registered Disability Savings Plan was designed to be a long-term option for those looking to plan for the future financial security of themselves or their family member. As such, the plan will be the most beneficial for those who are able to open and save over a number of years. For many people, they may not have the option of saving over a larger number of years, and will therefore look to use the plan somewhat differently then those (for instance) who are saving for a child and can start early.
A friend of mine was recently explaining how she was having some trouble explaining to the bank that she didn’t want to receive any grant and bond, and instead wanted to simply put in her money so that she could take out payments whenever she wanted. At 48, she realized that she was only eligible for two years of grant, and wanted to be able to use the RDSP right away, instead of waiting to take out payments at the age of 60.
Now from a purely financial standpoint, her deciding to forgo receiving two years of the grant doesn’t make sense. In order to maximize the amount of money in the plan, it would make more sense to take advantage of the grant. I mean, who wouldn’t want free money into their plan?
That would be true if it were all about money….but it’s not.
For some people like my friend, they have been restricted from using money they receive in the manner they want. Although different for each jurisdiction, in most provinces the regulations tied to those receiving disability benefits mean that the amount of money you can save and spend is restricted, along with restrictions on what you can spend it on. For someone who has had to justify every purchase they ever make to make sure they don’t lose their disability benefits, having the opportunity to put money away, and then spend it on whatever they want is a very exciting prospect.
So why is there confusion?
1) Many people are still uncertain as to how you can take out payments, and what are the rules and restrictions (see my post on payments by clicking here) .
2) The launch of the RDSP happened very quickly and many of the financial institutions (along with everyone else) are still trying to wrap their heads around what is allowed and what isn’t.
3) Financial Advisors are trained to make you money, so if you are proposing to use the plan in a way that makes less money it will be important to explain why.
4) Financial institutions are not required to allow every type of payment, only payments determined by the Lifetime Disability Assistance Payment formula. From what we have seen so far, most have been very flexible around the types of payments they allow and have not restricted payments to the formula.
The KEY: Always make sure to outline your intentions and plan for the RDSP. Answer the question: How do I want to use it? When do I want to take out payments? Do I want to use it as a long term savings plan, or do I want to begin using it now? What type of payments do I want to take out, lump sums or annual payments?
By letting your financial advisor know how you intend to use the plan, you can make sure that there is no confusion, and that it is best suited for you.
If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com.
Beware of Promises Too Good to be True!
by Patricia Bowles, Director of Communications & Education, British Columbia Securities Commission
Almost everyone knows this saying. But we hear over and over again that people lose money when they fall for a scam promising high returns with low or no risk. There is no such thing. If the investment promises high returns, then it is also promising high risks – meaning you can lose all of your money.
The new 2009 Investor Index tells us that 4% of Canadians have invested money in what turned out to be an investment fraud. One of the more surprising statistics in this year’s survey says that 38% of British Columbians are approached for a fraudulent investment. That’s 10% higher than the national average.
It also tells us that people can be approached by strangers, either on the phone or at the door, through the internet, by going to a seminar, through advertisements in the paper, on the radio or TV, or through family and friends.
If you are approached for an investment opportunity, do us a favour. Go to InvestRight.org and check out Protect Your Money. Watch and listen to each of the four modules. It provides investors with checklists and tips to evaluate and research investment opportunities for risks and potential fraud. It tells you how to report a fraud, how to share the information with friends and family. Get a second opinion. Ask an accountant or banker to look at the opportunity. Do your research. Check to see if the advisor is registered or has ever been disciplined by a securities regulator. Simply Google the person’s name.
When it comes to money, make your decision after you have done your research. The worst thing you can do is make an impulsive decision on the spot and write a cheque.
You can call us at 1-800-373-6393.
Patricia Bowles, Director of Communications & Education
If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com.
Recently a very comprehensive and well-researched article was published on the Registered Disability Savings Plan in the Canadian Tax Journal. The article was written by Jamie Golombek, Managing Director, Tax & Estate Planning for CIBC Private Well Management, and co-edited by Pearl E. Schusheim and Gena Katz. Some of you may have come across Mr. Golombek’s column in the National Post called “Tax Expert” which delves into the intricacies of tax planning.
The article published in the Canadian Tax Journal is entitled “Planning with Registered Disability Savings Plans”, and is a thorough look at all the various parts of the RDSP. Is a great resource for financial planners and for any adventurous individuals who want to know every detail about the plan.
If you want to take a look at the article, you can visit Jamie’s website at http://www.jamiegolombek.com or click on one of the following links:
English Version – Planning with Registered Disability Savings Plans
French Version - Stratégies de planification et regime enregistré d’épargne-invalidité
Stratégies de planification et régime
enregistré d’épargne-invalidi
Once again, I will try and do the impossible and explain the types of payments you can take out of an RDSP in a clear and understandable way. For any of you who have been visiting this blog often and following the progression of the RDSP, you know that this is not an easy task. The terminology and formula’s associated with payments from an RDSP often create confusion amongst people trying to learn about the plan.
So, wish me luck.
In this post I will refrain from using the official terminology of Disability Assistance Payments (DAPs) and Lifetime Disability Assistance Payments (LDAPs), and instead break down the different types of payments into 5 categories or scenarios. I will define what I mean by the “10 year rule” for those of you who are unfamiliar.
Definitions
10 year rule = if you receive any payments from the federal government in the form of the grant or bond, you will need to wait at least 10 years after the last grant or bond has been received before you start withdrawing from the plan. If you decide to withdraw before this ten year waiting period is up, you will have to pay back any grant or bond that has been received in the last ten years (not including interest).
Payment formula = some payments out of the RDSP must come out as determined by a formula. This formula (simplified) is “Total Amount in the plan” / divided by “Years expected to live”. ** Note that this is not the full formula, just a simplified version for clarity.
The Five Ways You Can Receive Payments:
1) No Federal Contributions: If someone opens up an RDSP and only contributes their own money into the plan (or the money contributed by friends and family) there are no restrictions on when you can withdraw from the plan or how much. Once you turn 60 years of age, minimum annual payments will need to start coming out of the plan, but you are still allowed to take out as much as you want, whenever you want. In this scenario you do not have to worry about the assistance holdback amount (or as we call it, the ten year rule).
Example – David decides that he will only put in his own money and deposits $15,000 at the age of 52. David could withdraw payment from the RDSP at any time and in any amount. At the age of 60, formula payments would begin coming out of the RDSP, but David could still take out larger amounts.
2) Annuity: If you would like to have even payments paid out over your lifetime, there is a provision in the legislation to allow for annuity payment. An annuity is where you make a lump sum payment to a financial institution who then pays you income for the rest of your life. In this case, you must still be conscious of the 10 year rule.
Example – Sarah’s family opened up an RDSP for her when she was 10 years old and contributed $1,500 every year. Once Sarah turned 40, she wanted to receive the same amount in payments every year and took out an annuity from a life insurance company that pays her $7,000 a year.
3) More Personal Contributions than Federal Contributions: If you (and friends and family) have put in more contributions into your RDSP than the federal government, you are allowed to take out lump sum payments above and beyond the formula. These lump sum payments will not start an annual payment and can be received before the age of 60. Once you reach the age of 60, minimum payments as determined by the formula above will begin to come out annually, although you can still take out lump sums larger than the amount determined by the formula. You will still need to take into account the 10 year rule for these payments.
Example – Katy and her friends were able to contribute $100,000 over 30 years by the time she was 45 and received $70,000 in federal Grant. Katy decides at 45 that she wants to take out $30,000 towards a down payment on an apartment. She withdraws the payment without causing an annual payment to occur.
4) Less Personal Contributions than Federal Contributions: If you have contributed less than the federal government into your RDSP, you can never take out payments that exceed the amount determined by the formula. With this type of payment you must always take into account the 10 year rule. Within this scenario there are three options:
- You wait until 60, at which point payments determined by the formula are paid out each year.
- You decide you want to start receiving payments before the age of 60, and you start the annual payments early. Ex. John decides at 55 he wants to start receiving annual payments determined by the formula, and thus instigates these payments.
- You decide you want to receive a one-time payment that will not instigate annual payments (between the ages of 27 and 58). Because you have contributed less than the federal government, you can take out a one-time payment but it cannot exceed the amount determined by the formula.
Example – Since he turned 19, Tim has only ever received the $20,000 in Federal Government Bond. Tim decides at the age of 56 that he wants to start receiving payments from his RDSP. At this point, payments as determined by the formula begin to come out every year.
5) Shortened Life Expectancy: If the person has a shortened life expectancy (within 5 years) the formual does not apply and they can take out payments of any size. ** Must still adhere to the 10 year rule.
Example – Connie had an RDSP set up for her when she was 10 years old, and her parents have deposited $1,500 into her account every year for 10 years allowing her to get $35,000 in Grants. At 30 years old, Connie finds out she has less than 5 years to live. Her doctor certifies this diagnosis for the Canadian Revenue Agency, and Connie starts taking out payments of any size from the plan.
Important – It is up to the financial institutions as to whether they will allow lump sum payments (other than the formula payments) to come out of the plan. It is important that you speak with your financial institution and make sure they allow you to take out these types of payments if this is how you want to use the RDSP.
The end.
Please let me know if this explanation is clear and understantable. If it is not, I will keep trying until it is. Thank you again to everyone for all your feedback. I hope this has been helpful.
If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com.
London Drugs and PLAN announce winner of June 15 Registered Disability Savings Plan contest –
Port Coquitlam family to receive $1,500 RDSP
London Drugs Assistant Store Manager Chris Knowles presents Tisharra, Connor, and Kirstin Diamond with a $1,500 contribution to a RDSP with Chair of PLAN’s Board of Directors Susan Whittaker and PLAN’s Executive Director Jack Styan
Excerpt from London Drugs/PLAN Press Release
RICHMOND, BC, August 6, 2009 – London Drugs and Planned Lifetime Advocacy Networks (PLAN) are pleased to announce Tisharra Diamond of Port Coquitlam as the winner of the June 15th Registered Disability Savings Plan (RDSP) contest. Tisharra will receive a $1,500 contribution towards her son’s RDSP. Launched December 2008 as the first of its kind in the world, this tax-deferred savings vehicle will assist families in planning for the long-term financial security of their relatives with disabilities. It is a savings plan similar to a Registered Educational Savings Plan, however designed specifically for people with disabilities in Canada.
“London Drugs is very proud to partner with PLAN on this first-of-its-kind initiative for families with disabilities,” said John Tse, vice president Pharmacy. “At London Drugs we recognize the importance and value of this savings plan and are pleased to be offering two more contest dates that will give families the opportunities to also win a $1,500 RDSP contribution.”
A RDSP allows anyone already eligible for a disability tax credit to invest savings tax-free until withdrawal, up to a lifetime limit of $200,000, and friends and family members can also contribute to a loved one’s RDSP. The federal government has also created the Canada Disability Savings Grant and the Canada Disability Savings Bond as an incentive to set up and contribute to a RDSP.
“We are excited to be partnering with London Drugs on this RDSP contest and distribution of our Safe and Secure: RDSP Edition books,” said PLAN Executive Director Jack Styan. “The contest amount of $1,500 could translate into a deposit of $4,500 to a family member’s RDSP depending on the income level of the family as outlined by the government matching program. We want to encourage everyone with a family member who has a disability to enter the remaining two contests and to begin donating to a family member’s RDSP.”
British Columbians with a disabled family member can visit any London Drugs Pharmacy to obtain the new, B.C.-specific Safe and Secure: RDSP Edition book. The book offers helpful information related to disability benefits, taxation, trusts, Representation Agreements, wills, estate planning and the new Registered Educational Savings Plan. The PLAN RDSP contest sponsored by London Drugs is open to all residents of British Columbia who are eligible to set up a RDSP (for eligibility requirements see www.rdsp.com/how.html). The final two contest draws occur August 15, 2009 and October 15, 2009. Prizes must be accepted as awarded and are non-transferable with no substitutions permitted.
Visit www.plan.ca to sign up for the last two draws. If you have submitted your name for the first draw, you will automatically be entered for the next two. Good luck!
If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com.
For those of you who have been following along, this has been one of the most discussed issues since the RDSP was first launched in December of 2008. The availability of the RDSP across Canada has brought into focus the absence of comprehensive supported decision-making vehicles in the Canadian provinces, other than BC (Representation Agreement). Below you will see an excerpt from our June ActionPLAN which details the policy reforms we are looking into that may provide solutions to the guardianship issue. To see a copy of our full ActionPLAN click here.
Excerpt from PLAN`s June edition of ActionPLAN – Jack Styan
The Issue
The RDSP has highlighted the limitations of our current legal system, which regulates decision-making for vulnerable adults. Aside from BC, families who wish to assist an adult family member to open an RDSP are limited to adult guardianship. Most people who are not able to manage their own RDSP would also be precluded from assigning a Power of Attorney. Jurisdictional issues between the federal and provincial governments are an added complication.
Most families and people with disabilities that we have spoken with find adult guardianship lacking on one or more counts, including:
- Cost;
- Loss of legal status;
- Indignity of being deemed “incapable”.
We have been working with the Federal Government, financial institutions, and other disability organizations to find a suitable solution. It’s a complicated issue to try and solve because of the many considerations involved.
A solution needs to include the following principles:
- Where people are able to manage their RDSPs, they should be entitled to manage their own affairs
- Where people are not able, the best people to act as account holders are people who they trust, who know them well and who are actively involved in their lives
- When it is necessary to grant authority to manage their RDSPs to another, the powers granted should be as targeted as possible
- People should remain involved in any decision-making process to the extent that they are able
- There needs to be a simple method of naming alternates or reassigning authority
- Any mechanism should be easily implemented and administered.
Solutions:
Reforming guardianship laws across the country would be the best and most far reaching solution as the positive impact of the reforms would be more far- reaching than measures that affect just the RDSP. This, however, is a long term solution and we want an immediate solution that will give people immediate access to the RDSP. The most promising solutions include:
1. Interpretation of “Legal Representative” by Canada Revenue Agency to include de facto guardian or next-of-kin. An interpretation which broadens the understanding of “legal representative” beyond powers of attorney and traditional adult guardianship (tutor, curator, trustee, committee, etc.), would enable a broader group of people to act on people’s behalf immediately.
2. Creating a new federal process that allows people to assign someone to act as the “trustee” of their RDSP, without a test for contractual competence, would enable transfer of responsibility for managing an RDSP without requiring guardianship.
There are several situations where a trustee of benefits can be appointed in a relatively informal and streamlined process. The processes protect people’s assets by assigning fiduciary responsibility.
Actions:
Look for more ongoing information on our blog on www.rdsp.com and add your thoughts and comments.
Raise your concern with both federal and provincial representatives when the opportunity arises. The concern about adult guardianship as an inappropriate method with which to assist people to handle their financial, personal or health care decisions is not well understood. We need people to know that it is a problem.
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