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The Canadian Imperial Bank of Commerce (CIBC) will now be offering RDSPs to Canadians across the country.  CIBC announced this morning in a news release that they are prepared to issue RDSPs.  

“The RDSP is an effective way for clients with disabilities and their families to save for the future and make the most of government grants and bonds, all the while deferring tax on the plan’s earnings and growth”, says Jamie Golombek, Managing Director of Tax and Estate Planning for CIBC.

“Golombek discusses that prior to the arrival of the RDSP, trusts were the main vehicle used when planning for persons with disabilities. Fully discretionary trusts have been commonly used to set aside assets for a disabled beneficiary, including an inheritance, but still preserve the beneficiary’s right to collect certain government benefits and entitlements. Putting assets into an RDSP, instead of giving them to the beneficiary outright, will also protect against a beneficiary losing valuable disability benefits in most provinces, but RDSPs have the added benefits of saving money in a tax-deferred manner, while collecting CDSGs and CDSBs.”

For the entire press release you can visit: http://www.newswire.ca/en/releases/archive/February2009/24/c3240.html

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Guest Post by Eileen Reppenhagen, CGA, ACG, CL

www.taxdetective.ca  

When a person goes into the bank (at present the Bank of Montreal and Royal Bank of Canada) they are required to complete an application.  The application is sent to Public Works as there is not a system at present that can transmit the information from the bank to HRSDC.  Public Works sends this information to HRSDC where the validation procedure takes place.  HRSDC sends a data tape to CRA to verify eligibility for the DTC and the citizenship of the beneficiary.  This information is then transmitted back to HRSDC.  If the beneficiary is eligible for the DTC, information is then sent from HRSDC to the RPD where the plan is registered.

Because the RDSP was not made available until the end of 2008, interested applicants are not being penalized.  They have until March 2, 2009 to apply for the 2008 year.  Registered Plans (CRA area involved) will maintain the unregistered plan until April 30, 2010 and then send the client a letter informing them of the closure if nothing has been received.  A person can still contribute to the plan, even though eligibility for the DTC may not have been established. 

The grant and bond portion of the RDSP will be retroactively applied when DTC eligibility has been confirmed.  As an example, if a person applies on March 1, 2009 for the 2008 year and does not receive confirmation of their eligibility until October 2010, they would still receive grants and bonds (where eligible) for the 2008, 2009 and 2010 years. 

Eileen Reppenhagen, CGA, ACG, CL

www.taxdetective.ca  

Some of the families that we have been speaking to who are looking to set up an RDSP in time for the March 2, 2009 deadline to receive the 2008 Grant and Bond have been told some things that are misleading.

We have heard that someone has been telling families and individuals “You can put your money with us, we’ll designate it as RDSP and WHEN we are confirmed as an approved financial institution your plan will be opened retroactively and you will receive the grant and bond as if you had contributed when you made the deposit.”

Please be wary of setting an RDSP up with any financial institution that puts forward this promise.  It is our understanding that in order to set up an RDSP before this deadline and receive the 2008 Grant and Bond, you must set up an RDSP with a financial institution that has an agreement with the Federal Government to administer the RDSP.  Currently, the only FI’s who have this agreement in place are FMOQ (small Quebec FI), Bank of Montreal, and the Royal Bank of Canada.  If a financial institution is telling you the above, please be wary.

They may say that it is okay because there is a grandfather clause for financial institutions to apply for the Grant and Bond on behalf of their clients until 2010.  This is true, BUT it is our understanding that they still must be an approved RDSP issuer when they receive contributions from someone into an RDSP, otherwise it will not count as contributions before March 2, 2009.  

There may be a few financial institutions coming on board before March 2, 2009, but make sure they are approved by the Federal Government as an approved issuer.  We will be updating this blog and http://www.rdsp.com everytime a new financial institutions is approved as an issuer.

Starting this morning, RBC began offering RDSPs to Canadians from across the country.  If you would like to view more information on RBC’s launch of the RDSP you can visit www.rbc.com/rdsp, or the french equivalent  www.rbc.com/reei.

RBC will be offering the RDSP through their RBC Advisors who you can set up an appointment with by calling 1-800-463-3863.

Remember, if you want to benefit from the 2008 Grant and Bond, make sure to set up your RDSP and contribute before March 2, 2009.  On December 23rd, 2008, the Federal Government announced that they would provide an extension to receive the 2008 Grant and Bond due to the shortened timeframe and limited number of financial institutions offering the plan.

Here is the application form from RBC if you want to take a look.  You will need to fill part of this out with the RBC Advisor.

rdsp-application__writable-pdf-3

We will keep updating the blog as soon as other financial institutions come on board!

The Government of the Northwest Territories has joined the group of provinces and territories who are progressively backing the full exemption of RDSPs from affecting their provincial disability income assistance.   The Honourable Jackson Lafferty announced that the NWT Government will fully support the implementation of this program.

“Withdrawals from RDSPs will not affect federal income-tested benefits and credits, such as the Canada Child Tax Benefit, the Goods and Services Tax Credit and Old Age Security benefits.

Mr. Speaker, I am pleased to confirm today that the Department of Education, Culture and Employment will fully exempt both the RDSP asset and RDSP withdrawals from consideration in the assessment process for all ECE Income Security Programs.

The Government of the Northwest Territories supports the Federal Government’s plan for persons with disabilities. This program supports our vision to give NWT residents the opportunity to become self-reliant as individual capacity allows, to participate fully in community life, and to share in opportunities available to them in their communities.”

To view the announcement in its entirety visit:  http://www.exec.gov.nt.ca/currentnews/speechDetails.asp?varStatement_ID=773

Nova Scotia has joined the majority of provinces who are fully exempting the Registered Disability Savings Plan when calculating clients elgibility for income assistance.  Nova Scotia announced this fantastic news earlier this morning and will allow Nova Scotians receiving income assistance to fully benefit from this program.

“Many people worry about what will happen when they’re no longer here to provide care for a family member who is disabled,” said Community Services Minister Chris d’Entremont. “This will give families peace of mind by allowing them to plan a more financially secure future for their relative.

There are no restrictions on who may contribute to a Registered Disability Savings Plan and no annual contribution limit. There is a lifetime maximum of $200,000 per individual fund. The federal government recently announced that the 2008 contribution year has been extended to March 2, 2009”

This means that BC, Alberta, Saskatchewan, Manitoba, Ontario, Newfoundland and Labrador, Yukon, Nova Scotia, (and sounds like NWT), have all come out in complete support of the RDSP.  Quebec and New Brunswick have exempted the RDSP as an asset (meaning it can grow to whatever amount without affecting Disability income assistance benefits), but have capped the amount you can receive from an RDSP monthly at $305 (QB) and $800 (NB).  PEI has exempted the RDSP as an asset and income, up until someone reaches the low income threshold (go to http://www.rdsp.com for more details).  Nunavut is yet to announce their treatment of the RDSP.

To view the official press release you can visit the Nova Scotia Department of Community Services website at http://www.gov.ns.ca/news/details.asp?id=20090211002

Feb 9 – RBC announced today that it will be offering an RDSP product effective February 16th.   This is good news for Canadians as they now have a choice about where they open their RDSPs.

At the same time, PLAN and RBC announced that they are teaming up to make sure that all of the 500,000 Canadians who might be eligible to open an RDSP do so.

People wanting to open an RDSP with RBC are advised to call 1-800-463-3863 to get more information and book an appointment with an RBC Advisor.

RBC has put out an offcial press release which you can view: http://www.rbc.com/newsroom/2009/0209-plan.html

Another question that has been coming up frequently is around applying for the Disability Tax Credit.  The approximate time it takes to process the DTC application is around 6-8 weeks (approximate), and this has many people wondering whether they can set up an RDSP before they apply for and/or receive the DTC.

The good news is that you will be allowed to set up an RDSP before you have the DTC designation, as long as you are approved for the DTC in the same year you set up an RDSP.

The Income Tax Act states that you must be eligible for the DTC in the taxation year for which the plan is opened, and does not state that you must be DTC eligible before you open an RDSP.  This is an important distinction as many people will be worrying as to whether they can open an RDSP before the March 2nd deadline to receive 2008 Grant and Bonds.

This being said, you will also want to consider the implications of setting up an RDSP before you are approved to receive the Disability Tax Credit.  If you were to apply for the DTC after having set up an RDSP, and you were deemed ineligible to receive the credit, the plan would not be certified and and any income generated in the plan would be considered income for that year. 

So, if you can, make sure to apply for the DTC and receive confirmation of your certification before setting up an RDSP.  If this is not possible, it is important to be aware that you can still set up an RDSP, but that you must apply and receive the DTC in the same year.

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