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1. Receive up to $70,000 from the federal government in matching contributions. The federal government has implemented the Canada Disability Savings Grant program to assist Canadians with disabilities to save for their futures.

The federal government will contribute up to $3,500 per year to your RDSP through the Canada Disability Savings Grant program, if your net family income is below $81,941. (Family income is that of the beneficiary if the beneficiary is 18 years or older). The government’s matching contribution rates are as follows:

– $1,500 on the first $500 that you or your family contribute to your RDSP, and

– $2,000 on the next $1,000 that you contribute.

2. Receive up to $20,000 from the federal government without making a contribution. The Canada Disability Savings Bond program will contribute up to $20,000 into your RDSP if you have a low income.

The federal government will contribute $1,000 per year to your RDSP through the Canada Disability Savings Bond program, if your net family income is below $23,855. (Family income is that of the beneficiary once the beneficiary is 18 years or older.) A smaller amount is contributed into your RDSP if your incomes is between $23,856 and $40,970 – all without you making a contribution yourself.

3. Saving in an RDSP doesn’t affect other disability benefits. Your provincial disability benefits are not affected when you save in an RDSP, no matter what province or territory you live in. Federal government benefits, like Canada Pension Plan, Disability Benefits, Old Age Security and Guaranteed Income Supplement are also not affected.

When it comes time to withdraw your money from your RDSP, the federal government – and most provincial governments – have said that you can use any amount from your RDSP without affecting your benefits.

Quebec, New Brunswick and Prince Edward Island have said that your benefits won’t be affected until your monthly income is greater than a certain amount. (In New Brunswick, you can receive $800 per month; in Quebec, $300 per month; and in PEI, you can receive an amount that brings your income to the low income levels as defined by the National Council of Welfare.)

Remember that when you turn 65, your go off of your provincial disability benefits and on to the federal government programs for seniors: Old Age Security and Guaranteed Income Supplement.

4. Compound Interest. When you save money and invest it in an RDSP, it begins to earn you income. After only a few years, your RDSP’s annual investment income is greater than your annual $1,500 contribution. You can see in the table below that if you earn 5% on your savings, your annual investment income is greater than your annual contributions after only 5 years.

    Your Contributions Federal  Gov. Contributions Income on Investment Total RDSP Savings
    Year 1
    $1,500
    $4,500
    $300
    $6,300
    Year 2
    $1,500
    $4,500
    $615
    $12,915
    Year 3
    $1,500
    $4,500
    $946
    $19,861
    Year 4
    $1,500
    $4,500
    $1,293
    $27,154
    Year 5
    $1,500
    $4,500
    $1,658
    $34,811

 

5. You can spend your RDSP money on anything you want. Neither the federal government nor provincial governments have placed restrictions on what you can spend your RDSP money on. It’s yours – you can do what you want with it.

6. Anyone can make contributions to your RDSP. You. Your parents. Your grandparents. Your brothers, sisters, aunts and uncles. Even your friends. And when they contribute, the federal government contributes even more – up to three times more!

7. If you receive a lump sum amount, you can shelter you money in an RDSP. If you receive an inheritance, a legal settlement or a large severance payment, you may be able to put it into an RDSP for future use without affecting your federal or provincial disability benefits.

8. The income that you earn on your savings in an RDSP is tax deferred. You only have to pay tax when you make withdrawals from your RDSP. And you pay tax only on the government contributions and the investment income in your RDSP. You don’t pay tax on the money that you have contributed.

9. People will begin to see you differently. People have told us that when they own a valuable asset, others treat them like investors, customers and home owners rather than people with disabilities.

10. You will have more choices. Think what a difference it would make to have a bit more money so that you could begin to do things that you can’t financially do now.

(from www.rdspresource.ca)

Several reforms important to people with disabilities became law in mid-December when Bill C-47 (the last of the budget Bills) was passed by the Senate and given Royal Assent.

In his budget, Finance Minister Flaherty announced carry forward provisions for the Canada Disability Savings Grant and Bond as well as provisions for the rollover of RRSPs and RRIFs to the RDSPs of sons, daughters and grandchildren.

1.  Carry Forward Provisions for RDSP Grants and Bonds

Effective 2011, people’s Canada Disability Savings Grant and Bond entitlements can be carried forward.

When a person opens an RDSP, Canada Disability Savings Bond entitlements will automatically be calculated and paid into the plan for the preceding 10 years (but not before 2008, when the RDSP was launched).  This means people opening RDSPs in January, 2011 will can qualify (based on income) for up to $4,000 in Canada Disability Savings Bond – $1,000 for each of 2008, 2009, 2010 and 2011.

At the same time, the balances of unused CDSG entitlements will be determined for the same period. If contributions are made to the RDSP, Canada Disability Savings Grants will be paid on unused entitlements, up to an annual maximum of $10,500.  The matching rate on unused entitlements will be the same as if the contribution were made in that year.  In addition, contributions will be used against Grant entitlements at the highest rate first.

That means a contribution of $2,000 into a new RDSP in 2011 will result in a Canada Disability Savings Grant payment of $6,000 ($2,000 x 300%).  Combined with the Canada Disability Savings Bond, the result will be $10,000 from the federal government.

That’s equivalent to turning $2,000 into $12,000!  See table below:

Canada Disability Savings Bond $4,000
Contribution $2,000
Canada Disability Savings Grant $6,000
Total in RDSP $12,000

2.  RRSP/RRIF Rollover to a Registered Disability Savings Plan

The new provisions will permit parents and grandparents to rollover RRSPs and RRIFs, at death, to the RDSPs of financially dependent children and grandchildren, on a tax deferred basis.  A person is generally considered to be financially dependent if their income is below a specific threshold ($17,621 for 2010). A person whose income is above this amount may also be considered to be financially dependent if dependency can be demonstrated.

Normally any assets held in RRSPs and RRIFs become income in the year of the death.  When these assets are passed to the RDSP of a child or grandchild, the tax that would normally be payable is waived.

The amount of the rollover may not exceed the beneficiary’s available RDSP contribution room. That means as much as $200,000 can be rolled into a new RDSP.  If contributions have already been made then the amount will equal $200,000 minus previous contributions (This doesn’t include federal government contributions).

The rollover will count as contributions towards the beneficiary’s lifetime limit but will not be matched by Canada Disability Savings Grants. The rollover will be considered private contributions for the purpose of determining whether private or government contributions are greater. But because the rollover will not have been subject to income tax, it will be considered taxable when withdrawals are made.

The rollover is effective for deaths occurring on or after March 4, 2010. For deaths of an RRSP annuitant after 2007 and before 2011, special transitional rules will apply.

The Honorable James Flaherty, Minister of Finance, has once again taken the initiative to ensure that people  with disabilities are able to access the RDSP.

You are probably aware that the Disability Tax Credit (DTC) is one of the key eligibility requirements to open an RDSP.

You might not be aware that most determinations made by Canada Revenue Agency under the Income Tax Act can be appealed to the Tax Court of Canada.  This includes applications for the Disability Tax Credit.

There is, however, currently a law, that prevents people from making an appeal to the Tax Court of Canada unless it affects their tax payable.   This means that if a person has insufficient income to pay taxes, and has nobody to transfer the Disability Tax Credit to, then a determination on their eligibility for the DTC cannot be appealed to the Tax Court (even if it might affect their ability to open an RDSP).

Minister Flaherty today announced his intent to change this legislation:

“Procedural issues of this nature should not be an impediment for individuals who wish to establish their right to the Disability Tax Credit and, as a result, also their right to open an RDSP.

“To promote the fair and equitable treatment of Canadians, I intend to introduce legislative amendments at the earliest opportunity so that individuals can, in every case, appeal a determination concerning their eligibility for the Disability Tax Credit.” – Minister James Flaherty

Press Release

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

The 2010 Federal Budget had some really exciting news regarding the RDSP.  For those of you who were able to read through the entire text, you may have come across some very important highlights, including:

  • In recognition that families of children with disabilities may not be able to contribute regularly to their Registered Disability Savings Plan (RDSP), Budget 2010 proposes to allow a 10-year carry forward of Canada Disability Savings Grant (CDSG) and  Canadian Disability Savings Bond (CDSB) entitlements.  In event of delays of opening a RDSP as a result of the complex guardianship processes that are in place in some provinces, the proposed carry forward will preserve a beneficiary’s entitlement to CDSGs and CDSBs so that they are available when a plan is opened.
  • In the Budget, the government is also encouraging all provinces to look at introducing more streamlined alternative processes to formal guardianship arrangements, such as those in place in British Columbia.
  • To provide parents more flexibility in ensuring that their savings may be used to support a disabled child, when they are no longer able to support the child, Budget 2010 proposes to allow a deceased individual’s RRSP or RRIF proceeds to be transferred, on a tax-free basis, to the RDSP of a financially dependent infirm child or grandchild.
  • To enhance accessibility for people with disabilities, Budget 2010 extends the Enabling Accessibility Fund and provides $45 million over the next three years. The Fund will continue its support for small projects which focus on removing barriers and enhancing accessibility. The program will also support a number of mid-sized projects, allowing for communities to undertake larger retrofit projects or foster partnerships for new facilities.

PLAN is very pleased with the proposed initiatives around the RDSP that have been outlined in the Budget.  These will have serious impact on thousands of Canadians with an RDSP or looking to set up an RDSP.

Here is a quick breakdown of the highlights identified above:

RRSP Rollover

The first change is that parents and grandparents will now be able to roll their RRSPs and RRIFs into a RDSP of a loved one with a disability on a tax deferred basis.

The advantage of the rollover is twofold.  Because the RRSPs and RRIFs are collapsed at death, the entire amount becomes taxable income in one year.  This often results in substantial tax payable.  When the funds are passed into an RDSP no tax is payable.  When the funds are withdrawn from the RDSP, they are taxable in the hands of the beneficiary.  In most cases they will be withdrawn over many years, taxed at the beneficiary’s tax rate, and little tax will be paid.

For example, if a grandparent with a $100,000 RIF were to pass away, the $100,000 would become income in the year of their death and, depending on the province, would be taxed at about 40%.  If rolled over into the RDSP of a grandchild, that’s a $40,000 savings!

The rollover is available to people who qualify for RDSPs.  In addition, the beneficiary must be a dependent.  Dependency is determined in one of two ways: either, there is a relationship of dependency – the parents or grandparents provide care or financial support or the beneficiary is financially dependent.  Adults are considered financially dependent if their income is below $17,621 (for 2010).

The amount that can be rolled over is limited to the contribution space remaining in a beneficiary’s RDSP.  Remember that the lifetime limit is $200,000.  This amount will not result in a federal government contribution.

Also, check with your lawyer or accountant about rules for RRSP and RRIF holders who have died since 2008.

Carry Forward of Grants and Bonds

The second change is the ability to carry forward entitlements for the Canada Disability Savings Grant and Bond.  The 2010 budget proposes to pay the Grant on entitlements for the previous 10 years (but not earlier than 2008 when the plan was established), if the person was eligible for the Disability Tax Credit then.

This means people establishing plans now will be able to claim the Grant for 2008 and 2009.  If a family opens a plan for their loved one and contributes $4,500 in 2010, the federal government will contribute as much as 10,500 in Grant and, if the person qualifies, they may be eligible for as much as $3,000 more in Bond.

While up to 10 years of entitlements may be carried forward, no more than 10,500 in Grant will be paid in any given year.

Guardianship and Law Reform

Many families outside of BC, who would like to assist a relative who might not be found to have contractual capacity, have not opened RDSPs because of the obstacles presented by adult guardianship.  If an adult does not act as holder of a plan that is set up when they are an adult, then the holder must be a legal representative.  Outside of BC, the options are adult guardianship or a Power of Attorney.

Many families have not opened plans because they do not want to subject their loved one to the process of being deemed incompetent and having many decision-making powers stripped away.  Others have expressed concern at the cost of the process

People in BC are fortunate to be able to appoint a legal “Representative” with a Representation Agreement even if they might not have contractual capacity.  A Representation Agreement is much like a Power of Attorney, except the person making the Agreement does not need to demonstrate contractual capacity nor does the Representation Agreement need to be drawn up by a lawyer.  In fact, in our experience, most people do not visit lawyers.  If a Representation Agreement is used to manage routine financial matters, then there must be two Representatives or a monitor must be appointed to safeguard the person if they are vulnerable.

The laws governing legal representation are provincial.  While the federal government has considered implementing a short term solution as proposed by PLAN, their preference is that it be done right by making the appropriate provincial and territorial reforms.  The carry forward rules mean that people will not be penalized while provinces consider changes to their adult guardianship and supported decision-making laws.

What is the solution? Provinces will decide, but the experiences of people with disabilities, families, seniors and others who have used British Columbia’s Representation Agreements have been very positive.

As families know all too well, parents do not live forever.  Regardless of who takes on responsibility for safeguarding a loved one into the future, the options for assisting a vulnerable person with their decision-making is either adult guardianship or Representation Agreements.  Representation Agreements provide the option of giving legal status to people’s support networks, whether those people be family or friends.   In developing long term plans for families, we have found them to be essential tools.

The recent ratification of the UN Convention on the Rights of People with Disabilities provides added incentives for provinces to take another look at the Representation Agreement.

Enabling Accessibility for Persons with Disabilities

The reforms to the RDSP have garnered most of the press but also in Budget 2010, the Government renewed its commitment to helping all Canadians to participate fully in their

communities by providing another $45 million for the Enabling Accessibility Fund.

The importance of accessibility can’t be overstated.  Catherine Frazee likens accessibility to a welcome.  Indeed, as Canadians do we want to leave anyone stranded on our doorsteps, unable to come in and enjoy our hospitality?

This is a commendable commitments.  Most people acknowledge that making Canada accessibility to all citizens will take time.  The commitment to this fund means that the federal government is making Canada accessible building by building, community by community.

To find out more about the Federal Budget 2010 you can visit:http://www.budget.gc.ca/2010/home-accueil-eng.html

To find out more about PLAN’s continuing public policy campaigns you can visit http://www.plan.ca or click here: http://www.plan.ca/sections/campaigns.html

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

Are you wondering why the income levels to receive the Grant and Bond have changed recently?  Every year these income levels will be indexed to account for inflation.  So, the income levels that receive the Grant and/or Bond for 2009, will be different than those receiving the Grant and/or Bond for 2010.

For those of you who are unfamiliar with how the income levels work, here is a quick refresher.  If you open an RDSP and want to receive money from the federal government, there are two options: the Canada Disability Savings Bond; and, the Canada Disability Savings Grant.  The Bond, designed for people who might not have much to contribute to an RDSP, is based completely on income and does not require any contributions.  The Grant, designed to encourage people to save, is based on how much you contribute into an RDSP, but will also look at your income to determine how much Grant you will receive.

So what are the new levels for 2010?

Canada Disability Savings Grant – If the beneficiary’s family income is less than or equal to $78,130, they are eligible for the full $3,500 in Grant.  If the beneficiary’s family income is more than $78,130, they are only eligible for the $1,000 in Grant.

Canada Disability Savings Bond – If the beneficiary’s family income is less than or equal to $21,947, they are eligible for the full $1,000 in Bond.  If the beneficiary’s family income is between $21,947 and $39,065, they are eligible to receive a pro-rated portion of the bond every year.

Today, in a ceremony in Vancouver Al Etmanski the Co-Founder and President of Planned Lifetime Advocacy Network (PLAN) was named as a first torchbearer for the 2010 Paralympic Torch Relay.

“For its first Paralympic Torchbearer, RBC selected Al Etmanski, an author and co-founder of Planned Lifetime Advocacy Network (PLAN), which was instrumental in advocating for the new Registered Disability Savings Plan and assists families across Canada and globally in addressing the financial and social well-being of relatives with a disability.

Graham MacLachlan, regional president, RBC, British Columbia, said: “Al Etmanski has long demonstrated his commitment to helping people with disabilities and their families succeed through his work as an advocate and social entrepreneur. RBC is proud to select him as our first Paralympic Torchbearer on this historic relay.”

To view the press release in its entirety visit: http://www.newswire.ca/en/releases/archive/November2009/27/c5788.html

To apply to be a Paralympic torchbearer visit: http://www.yougottabehere.com/

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

Canadians can now visit all 5 national banks and open up a Registered Disability Savings Plan.  Scotiabank came out today and began offering their version of the RDSP to their clients.  Similar to many of the other banks, Scotiabank will be offering a range of investment options, including Cash/Savings, GIC’s and Mutual Funds.

Scotiabank has joined Royal Bank of Canada, Bank of Montreal, CIBC, and TD Canada Trust in supporting this program for people with disabilities.  To find out more about opening an RDSP with Scotiabank you can visit their website at http://scotiabank.com/cda/content/0,1608,CID13346_LIDen,00.html or call Scotiabank Wealth Management Contact Centre at1-877-929-4499 and talk to one of their investment specialists.

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

Are you hoping to get the 2009 Grant for your Registered Disability Savings Plan?

Many of you will remember that to get the 2008 Grant deposited into your RDSP you had to make sure to contribute by March 2nd, 2009.  Notice – This was unique for 2008 Grants.  For 2009 Grants, you will be required to contribute by December 31st, 2009.  If you do not contribute before this time, any contributions you contribute in 2010 will be for 2010 Grants and will not be applicable to 2009.

Why has the deadline for Grants changed from 2008 to 2009.  As many of you may recall, the 2008 contributions were originally supposed to be received by December 31st 2008 in order to get the 2008 Grant.  As BMO was the first bank to offer RDSPs, and did not begin to offer them until late in December of 2008, that left little time to get your RDSP set up and your 2008 contributions in.  In response, the Finance Minister extended the deadline to March 2nd, 2009 to make sure there was enough time for people to open a plan and contribute for 2008.

This was for 2008 only! Make sure to contribute every year by December 31st to get your Canada Disability Savings Grant for that year.

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.

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