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Hopefully you don’t go to sleep at night wondering how to explain payments from RDSPs. We do!!!

It would be easy to take the attitude – “It’s complicated.  I’ll learn it when I need to.”  At PLAN, we don’t think that’s good enough.  It’s an investment.  It’s an insurance policy.  It’s the future.  We want to know that it will work so we can go to sleep at night with peace of mind – that it will work for our family members. 

In planning for the future over many years, families tell us that peace of mind comes with knowledge and action.

Here’s a summary of our latest, greatest explanation of payments.  (The full detailed document is attached at the bottom of the post)

Summary Table

Payment Type Federal Government Contributions exceed Private Contributions (at the beginning of the year) Private Contributions exceed Federal Government Contributions (at the beginning of the year)
LDAP requests when beneficiary is under age 60 – permitted- maximum of LDAPs combined with other payments must be limited by formula – permitted- LDAPs limited by formula
LDAP requests when beneficiary is age 60 or over – required- maximum of LDAPs combined with other payments must equal amount determined by the formula – required- formula determines the maximum LDAP payment
Flexible DAP requests when beneficiary is under age 60 – permitted- maximum of Flexible DAPs combined with other payments must be limited by formula – permitted- no limit on amount
Flexible DAP requests when beneficiary is age 60 or over – permitted- maximum of these payments combined with other payments must equal amount determined by the formula – permitted- no limit on amount
Beneficiary-requested DAPs – permitted between the ages of 27 and 59-  maximum of these payments combined with other payments must be limited by formula – not permitted
Terminal-iIllness DAPs – permitted whenever a physician provides a certificate that the beneficiary will not live longer than 5 years- no limit on amount – permitted whenever a physician provides a certificate that the beneficiary will not live longer than 5 years- no limit on amount

Payments – Detail – May 2010

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If you would like easy to understand information on the new Registered Disability Savings Plan please visit www.rdsp.com

As many of you probably are aware, throughout our discussion we have consistently tried to provide a clear explanation of the type of payments that you are allowed to take out of an RDSP. To see what type of payments the plan allows, you can view the post Payments from an RDSP: An Effort to Make it Understandable.  In today’s post I want to highlight that although the legislation and regulations allows for all of these payments to be withdrawn from the plan, it only requires financial institutions to provide the formula payments (or Lifetime Disability Assistance Payments).  Again, a financial institution does not have to offer lump sum payments to come out of the plan if they do not want to.

This is why, in the post “Mapping your Plan“, we highlight the importance of running through with your financial advisor how you want to use the plan.  By doing so, you can find out then and there whether you are allowed to take out lump sum payments.  If you find out that they do not allow lump sum payments and you wanted to be able to take out lump sums, then you may want to look at another financial institution.  Currently the only bank which has verified that they allow all types of payments is the Royal Bank of Canada.  In all likelihood many of the other banks will most likely allow all types of payments but it will be important that you find this out when planning for your RDSP, as we have heard of a few financial institutions restricting lump sum payments.

This probably won’t be an issue for many people, as I expect a lot of people to simply take out the formula payments (lifetime disability assistance payments), but for those who are using the RDSP differently, you will want to verify this option.

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