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2010 Federal Budget Personal Tax Changes -Impact on Families affected by Disability

By Tom O-Dwyer of Ability Tax Group – abilitytax.ca

Increase in Personal Amount Exemptions

The basic personal amount exemption has been increased to $10,382 in 2010. If you had no other tax credits or deductions, you would be able to earn income of $10,382 tax free in 2010 before the marginal rate of income tax payable is calculated.

Increase in income threshold levels eligible for child tax benefits

The 2010 Budget increase the income threshold levels to allow families to earn $40,970 before the national child benefit supplement is completely phased out (partial phase-out begins at $23,855). For children under the age of eighteen who qualify for the disability tax credit (“DTC”), The child disability benefit increases to $2,470 annually and allows families to earn up to $40,970 before the benefit begins to phase out.

Carry Forward of RDSP Grants and Bonds

Under the current legislation, contributions to a Registered Disability Savings Plan (“RDSP”) are eligible for matching Canadian Disability Savings Grants (“CDSG”) of up to $3,500 annually (with a $70,000 lifetime limit) depending on the family’s income and the amount of contribution. In addition, a Canada Disability Savings Bond (“CDSB”) of up to $1,000 annually (with a $20,000 lifetime limit) is contributed to the RDSP for low to modest income families regardless if contributions have been made to the RDSP. Available since 2008, no provisions existed to allow beneficiaries of the RDSP to carry forward CDSG or CDSB entitlements from previous years.

Beginning in 2011, Budget 2010 proposes to amend the Canada Disability Savings Act to allow a carry forward of CDSG and CDSB entitlements for a period of 10 years (but not available before 2008) based on the beneficiaries family income in those years AND RDSP eligibility for each year of the carry forward. An annual maximum of $10,500 of CDSG’s will be paid on carry forward of unused entitlements. In addition, plan holders will receive annual statements of CDSG entitlements.

Increase in income thresholds eligible for RDSP Grants and Bonds

The 2010 budget increases income threshold levels to allow families to earn up to $81,941 and still qualify for the maximum annual CDSG’s. In addition, the budget increases income threshold levels to allow families to earn up to $23,855 and still qualify for the $1,000 CDSB. Families may earn up to $40,970 and receive partial CDSB entitlements.

Rollover of RRSP, RRIF, and RPP Proceeds to an RDSP upon death

Under the current provisions of the Income Tax Act, when the annuitant of a Registered Retirement Savings Plan (“RRSP”), Registered Retirement Income Fund (“RRIF”), or Registered Pension Plan (“RPP”) passes away, the value of the RRSP, RRIF, or RPP is generally included in the deceased’s income in the year of death. An exception to these provisions occur when the proceeds of the RRSP, RRIF, or RPP after death are distributed to the deceased’s surviving spouse (or common-law partner), or to a financially dependent child or grandchild. In such cases, the proceeds are included in the income of the recipient.

A  further preferential tax treatment is available If the spouse (or common law partner), or child or grandchild was dependent on the deceased annuitant because of a physical or mental infirmity and receives distributions from the RRSP, RRIF, or RPP. An offsetting deduction may be claimed when the distributions are transferred (the tax deferred rollover) to the recipient’s RRSP or used to purchase an immediate life annuity. Generally, An infirm child or grandchild is considered financially dependent if the child’s (or grandchild’s) income for the year preceding the year of death of the annuitant does not exceed $17,621 (2010 rates).

Budget 2010 proposes to extend the above RRSP, RRIF, and RPP rollover provisions to allow proceeds to be transferred tax deferred to an RDSP of a child or grandchild of the deceased who qualifies for the RDSP and was financially dependent on the deceased. The contribution of the proceeds from a RRSP, RRIF, or RPP of the deceased to an RDSP will reduce the $200,000 lifetime contribution limit of the RDSP. These proceeds will not attract CDSG’s and the amount of proceeds will form part of the portion of disability assistance payments that is included in the beneficiary’s income when withdrawn from the RDSP. These measures will apply to deaths occurring on or after March 4, 2010. There are special  transitional rules that will allow a contribution to be made to the RDSP of an infirm dependent child or grandchild when the death of an RRSP, RRIF, or RPP annuitant occurs after 2007 and before 2011 that would permit equivalent preferential tax treatment.

 

Child Benefits Entitlement-shared Custody

Under existing rules, only one eligible individual can receive the Canada Child Tax Benefit, the Universal Child Care Benefit, or the child component of the GST/HST Tax Credit (collectively the “Benefits”) that are payable in respect of a qualified dependent. Budget 2010 proposes to allow parents who live separately but share equal custody of a dependent to receive annually one-half of the above Benefits that they would receive if they were the sole eligible individual. Payments would be monthly for the Child Tax Benefit and Universal Benefit, and quarterly for the GST/HST Tax Credit. This measure will apply to Benefits payable commencing July, 2011.

 

Single Parents and Universal Child Care Benefits

The Universal Child Care Benefit (“UCCB”) provides families with a $100 a month (taxable) for each child under the age of six years. In two parent families, the UCCB is included in the income of the lower income spouse or common law partner. In single parent families, the UCCB is included in the single parent’s income. Under these existing provisions, the single parent may pay more tax on the UCCB amount than a single earner family at the same income level on the same UCCB amount. Beginning in 2010, Budget 2010 proposes to allow a single parent the option of including the aggregate UCCB amounts in his or her income or in the income of the dependant for whom an Eligible Dependant Credit is claimed. If a single parent is unable to claim an Eligible Dependant Credit, he or she will have the option to include the benefit in the income of the child for whom it is paid.

Election to Receive Electronic Notices

Budget 2010 proposes to amend the Income Tax Act to allow taxpayers to elect to receive electronic notices of Canada Revenue Agency (“CRA”) information usually sent by mail. For example, provided the taxpayer authorizes the CRA, the taxpayer  may receive, via e-mail, notices of assessment or reassessment as well as determinations and re-determinations in respect of GST/HST credits and Canada Child Tax Benefit. This amendment does not apply to notices currently served personally or by registered mail.

Interesting Change for 2010

Budget 2010 proposes to change the inclusion rate for Canadian resident recipients of certain types of U.S. social security benefits. Currently, under Article XVIII of the Canada-U.S. Tax Treaty, 85% (inclusion rate) of such benefits received are required to be included into income. For U.S. social security benefits received after 2009, Budget 2010 proposes to reduce the inclusion rate to 50%. To qualify for the reduced inclusion rate, the taxpayer is required to be a Canadian resident continuously since 1996, and to have received qualifying  U.S. social security benefits throughout the period. The above rate reduction apply to spouses or common law partners (who meet the above criteria) of taxpayers who have died.

Poster-RDSP Chinese Telelearning -July21-2010

PLAN  is hosting a Chinese RDSP telephone seminar for Chinese families across the country July 21, 2010. Please see the attached poster for more information.

RDSP Teleseminar (Mandarin)

Date and Time: Wednesday, July 21, 2010 – 5 PM to 6:30 PM (Vancouver time)

Register

– by phone: 604-439-9566

– by email: inquiries@plan.ca

– by website: www.forthefuture.ca

殘障人士註册儲蓄計劃(RDSP)是加拿大政府新訂的一項儲蓄計劃,能幫助我們有殘障的親人建立長遠的經濟保障。殘障人士福利計劃倡導會 (PLAN) 將為加拿大華語家庭安排兩個中文RDSP 電話遙距講座,日期在2010年6月16日和7月21日。如果與您有聯系的華語家庭中有需要知道關於RDSP 資訊者,希望你能幫助將所附上海報交給他們。謹此致謝!

RDSP電話中文講座日期和時間: (溫哥華時間)
2010年7月21日(星期三)下午5時至下午6時 30分(國語)
報名電話:604-439-9566
電郵報名:inquiries@plan.ca

PLAN’s new  Step by Step Guide (to becoming eligible, opening and managing your Registered Disability Savings Plan) is available now for free download. Just click on the following link:  Step-by-Step Guide

With support from the Investor Education Fund, the guide has been written and designed in plain language for people with disabilities and their families.  It will walk you through all the steps necessary for becoming eligible, opening and managing an RDSP.

Feel free to use it and pass it on to others who might utilize it.  Our goal is to make information about the RDSP more accessible so that more people can use the RDSP to improve their financial security.

And….let us know what you think!  Post your comments and suggestions…there will always be another iteration.

We are continuing to find that many people still haven’t heard about the RDSP, aren’t aware of the benefits (EVEN IF THEY CAN’T CONTRIBUTE!), or don’t know how it works or how to set one up.

With a number of partners in BC, Alberta and Ontario we are putting on even more  seminars, telephone seminars and, in Ontario, webinars.  If you want to check what’s available in your region, check the following links:

Ontario

– In person: http://www.communitylivingontario.ca/families-individuals/funding-services/rdsp/rdsp-sessions-schedule

– Webinars: http://plantoronto.ca/RDSPwebinars/

BC and Alberta

– In person: http://forthefuture.ca/

– Telephone seminars: http://www.plan.ca/sections/seminars.html?utm_source=forthefuture.ca&utm_medium=websitelink&utm_campaign=rdspforthefuture

Feel free to pass this on to friends, forward the links and post to websites and blogs.

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

PLAN is undertaking a scan of the pan-Canadian impact of the RDSP on services and benefits accessed by people with disabilities.  This scan will examine the federal and provincial programs and benefits to evaluate the full range of implications of the RDSP on income, benefits, and other programs currently being utilized by people with disabilities.  Once we have a good overview of what programs and services people are receiving, and how they might be impacted, we can then develop proper strategies to advocate for any changes that are needed.

If you have a moment, we would really appreciate your input/feedback on the attached scan of British Columbia.  We are trying to identify all the benefits and services someone in the province of BC could receive if they have a disability, and then whether these services or benefits are asset or income tested.  Since the BC Government has exempted the RDSP from asset and income tests for those receiving BC Disability Benefits (PWD), many of the services and benefits will not be affected.

We are posting the following draft version of our British Columbia scan, but will be providing consequent scans for each province/territory.

Please keep in mind that this is a draft version and we fully expect it to have omissions or information that is incorrect.  The feedback you provide will help us make sure the final version is as accurate as possible.

BC Benefits Scan

If you have comments or feedback, please e-mail inquiries@plan.ca, and put “Scan Feedback, c/o Doug Brodhead” in the header”.

Thank you for all your support.

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

On October 7th it was announced that Attorney General Mike de Jong  introduced Bill 13 into the BC Legislature.  This Bill proposes amendments to the Adult Guardianship and Planning Statutes Amendment Act which was passed in October of 2007.  This bill will enable the proclamation of personal planning legislation, and will introduce important amendments to the Representation Agreement Act, the Power of Attorney Act, and the Health Care Consent and Care Facility Admission Act in British Columbia.

These amendments will make Representation Agreements more accessible to individuals and families across the province, while providing a greater degree of certainty for anyone who has already established a Representation Agreement.  Bill 13 will also allow any amendments to Planning Statutes to be brought into effect separately from the Adult Guardianship Act amendments.

With the launch of the Registered Disability Savings Plan, we have seen a rise in people setting up a Representation Agreements across the province.  As someone with a Representation Agreement in BC is seen to be a “legal representative”, it has allowed many people in BC the opportunity to become a holder for their loved ones RDSP without having to get full legal guardianship.

To view the press release from Ministry of the Attorney General visit: http://www.news.gov.bc.ca/Default.aspx?organization_obj_id=56429306-8c3e-4991-aeb2-1cc86f20bfdd and click on the news release for October 7th, 2009.

The availability of Representation Agreements in BC has brought into focus the absence of comprehensive supported decision-making vehicles in many other Canadian provinces.  We have been working with the Federal Government, financial institutions, and other disability organizations to find a suitable solutions, and will continue to do so.  There has been some significant work done on this issue and we hope to have something brought forth in the near future.  We will provide an update as soon as we know more.

For more information on Representation Agreements you can visit www.plan.ca and check out our online course.

For those of you who live in BC, I thought it might be worth mentioning that PLAN is running 3 contests where you could win $,1500 to be deposited in a Registered Disability Savings Plan of your choosing (it could be your own).  You do not have to purchase anything, and can simply sign up by visiting www.plan.ca and inputting your name and e-mail.

The 3 draws will be administered by an Independent Judging Organization on June 15th, 2009, August 15th, 2009, and October 15th, 2009.  You only need to sign up once to be considered for all 3 draws.  You must be at least the age of majority to sign up, but in the case of a child the parent can always enter the draw and then select their child’s RDSP to receive the deposit if they win.

In most cases this $1,500 contribution will leverage $3,500 from the Federal Government, resulting in $5,000 deposited into your RDSP.  

If you would like more information click here.

Remember, if you live in BC, you can also pick up a free copy of our book Safe and Secure: RDSP Edition at your local London Drugs Pharmacy.  To see the London Drugs location nearest you click here.

Safe and Secure: RDSP Edition

Safe and Secure available at London Drugs! 

As of April 1, families across BC can walk into any London Drugs location and pick up your free copy of Safe & Secure at the pharmacy. This family-to-family guide outlines the 6 steps to creating a good life for people with disabilities.  Safe and Secure offers helpful information related to disability benefits, taxation, trusts, Representation Agreements, wills, estate planning, and the new RDSP. 

If you live in BC and would like a free copy of Safe and Secure: RDSP Edition click here to find the London Drugs location nearest you.

Although this version of Safe and Secure: RDSP Edition is specific to British Columbia, PLAN is looking to develop editions for other provinces.  We will keep you updated of any developments. 

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

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