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To find out about the RDSP, whether you qualify, and where you can sign up, visit www.rdsp.com .  

In  a formal announcement today, the Government of New Brunswick decided to exempt the Registered Disability Savings Plan.  

“RDSPs will allow families to invest in the long-term financial needs of their children with disabilities,” Minister Mary Schryer said. “This will make it easier for families to save for their children who have disabilities, while also ensuring that these savings do not affect their child’s eligibility for disability supports.”

Although not a complete exemption, the NB Government will fully exempt RDSP assets when calculating clients’ eligibility for income-tested programs such as social assistance and social housing benefits. Clients will be eligible to receive up to $800 a month from an RDSP, in addition to their social assistance.  The $800 a month, as outlined by the Ministry of Social Development, will be based on the Low Income Cut-Off (determined by Statistics Canada), and will fluctuate depending on this measure.

To read the entire press release visit: http://www.gnb.ca/cnb/news/fcs/2008e1796sd.htm

For those of you keeping track, this means that we have 9 provinces who have come out in favour of the Registered Disability Savings Plan.  This includes full exemptions from British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Newfoundland, Yukon, and partial exemptions from Quebec and New Brunswick.  

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Exciting days as we prepare for the launch of the RDSP.  Today Alberta came out and annouced that they will be fully exempting the RDSP as an asset and income for people receiving provincial financial assistance programs.  This means that BC, Newfoundland, Saskatchewan, Manitoba, Alberta and Yukon have all come out and fully exempted the RDSP.  We are hopeful that the rest of the provinces will come out and announce their treatment of the RDSP in the next few days.  

Alberta was an interesting case as they decided to work cross-ministry and include Seniors within the exemption of the RDSP.  This opens it up to a really large group of people who will benefit and was a really interesting addition to the announcement.  

The Alberta government will ensure Albertans with disabilities who have a federal Registered Disability Savings Plan (RDSP) will not have their provincial benefits affected.  

The RDSP is a new federal program that will help parents and others save to ensure the long-term financial security of a child with a severe disability.  

“This will encourage families with children with disabilities to plan for their future needs, as well as help Albertans with disabilities to save money to supplement their income and maximize their independence,” said Mary Anne Jablonski, Minister of Seniors and Community Supports.”

If you would like to read more about the announcement you can visit: http://alberta.ca/ACN/200811/24835DEBE8291-F21D-D32E-DF629E66CD5566BA.html

Reminder: if you are new to this blog and want a detailed description of the RDSP please click on the header under “RDSP FactSheet” or “RDSP Information Bulletin”

In order to be eligible to set up a Registered Disability Savings Plan you must receive or be eligible for the Disability Tax Credit.  The Disability Tax Credit can be applied for by filling out Form T2201 and submitting it to the Canadian Revenue Agency.  This form consists of two parts, one that must be completed by the individual, parent or guardian (on the persons behalf), and two which must be completed by a qualified practioner. 

Sometimes applying for Credits and rebates can be a frustrating and time-consuming experience.  In an effort to help you maximize your chances of receiving the Disability Tax Credit and becoming eligible for the RDSP, we have asked Doug Lagasse of Ken Lagasse Inc., Chartered Accountants to provide a guest post on the challenges of applying for the Disability Tax Credit and what you can do to increase your chances.

The Grey List
Facing the Challenges of Qualifying for Disability Tax Credits, by Doug Lagasse

The application process for Disability Tax Credits (DTC) should be simple and straightforward but like many other things in life, reality can trump expectations.  In the case of DTC applications, the best way to overcome the challenges of qualifying is to know that there are grey areas in the application process and to understand how they apply to your situation.  This article is not about what types of medical conditions qualify for a DTC, but rather to enhance your awareness of the application process and your chances of qualifying.

In many cases, where the disability is severe and is unquestionably what the tax department calls a ‘marked restriction on daily living activities’, the challenges of qualifying will be less extreme. 

This grey list is not theoretical but based on years of experience. Each topic was chosen because these were some of the repeated issues that have affected numerous applications. It is offered in the spirit that “getting it right the first time” is more important than ever.  Recent federal government initiatives that support further tax reduction possibilities (potential income splitting) and the life enhancing new Registered Disability Savings Plan are dependent on a successful DTC application. 

Uniqueness

The effects of a prolonged medical condition that are experienced by each individual are unique and it is the effects of the condition that CRA will look at when reviewing an application.  The grey area here is, “When does a disability become severe enough to qualify for a DTC?”  How do good days and bad days matter? Does ability to work matter? How about likelihood of improvement?  What matters most, is that the description of the effects of a condition are clearly stated.

Doctors Role

Does your doctor, however well-intentioned, have a good understanding of what the tax department requires to successfully qualify a DTC applicant?  Do you?  The DTC application form (T2201) has changed numerous times in the last five years — once quite dramatically. Is your doctor up to date?  Most doctors are extremely busy and that can’t be good for their enthusiasm of completing forms.  If the application form is vague, missing information or is contradictory, the tax department will likely respond by sending a questionnaire to the doctor asking for clarification in some areas.  This should be avoided.  The modern trend of 10 minute appointments does not help doctors to fully understand the effects of a patient’s condition.  Be sure your doctor understands your condition, knows how long you have been affected and that they have all of your medical records. 

Loving the Tax Department

Each tax centre has a tendency to have different management guidelines and protocols.  As well, each officer who reviews the applications has a unique understanding of the intent of the legislation. Obviously, what that means is that the same application may be treated differently depending on whose desk it lands.  To avoid gambling with your application, make sure to pay close attention to your application process, so that the decision for them is easy to make and it is the one you want! Then you can love them too.

Sideways

Regretfully, even though a medical condition may normally qualify an applicant, DTC applications can be denied because of a technicality in the application process. Certainly, CRA allows for objections that can go as far as court challenges and usually this means your doctor would be involved. However, a way to look at it sideways is to re-apply in a succeeding year. Although it is now an uphill battle, this is allowed. CRA will be aware that you have previously been turned down and they will look very closely at your application and ask, “What is different this time?”  In this scenario diligence in understanding what went wrong in the first place, will go a long way.   Professional help is likely crucial. 

The Financial Results

A successful DTC application is the most important goal, but stay focused on maximizing financial results as well.  Canada has a self assessing tax system and you must tell the tax department what to do or they may not take action. In this case, the grey area is assessing all the options of properly transferring the DTC credits (and refunds) to a family member if they cannot be used completely by the person with the disability.

Grey Advice

Like a mouse asking a cat for the best place to hide, it may not always be in your best interest to depend solely on advice from the tax department.   Calling the toll free line and asking for advice can be hit or miss.  It is not that they intend to mislead you, but different interpretations can come into play.  In other words, getting the correct answers not only depends on your questions, but whether the officer from CRA knows the right questions to ask you about your situation.  

Being Successful

The DTC is an important document.  The most productive approach is to treat it as your responsibility, not your doctors.  Always get a copy of your DTC application from your doctor or representative.  The chances of success are improved by including supporting documentation with your application.  You or your representative (not your doctor) should submit your application.   

Remember, the tax department has no choice but to focus on the details.  Since a DTC application is most often a one-time application, it can mean significant value year after year, so your interests are best served with a similar focus.  Leave as little to chance as possible.  

For more information on how to apply and receive the Disability Tax Credit you can contact Doug Lagasse at 604-629-1919 or visit http://www.disabilitytaxcredit.ca

I thought it might be useful to run through a quick review of the Registered Disability Savings Plan. I find it very easy to get caught up in all the small details surrounding the RDSP, and as such, will run through a broad overview of the RDSP for those of you who are just beginning to acquaint yourself with the plan and prepare for its launch in December. I should also mention, in case there are some of you who would like to have a hard copy description of the RDSP, that you can click on our header under “RDSP FactSheet” to access our quick, printable two-pager.

RDSP Overview

Similar to a Registered Education Savings Plan, the RDSP is a long-term savings plan that will allow funds to be invested tax-free until withdrawal. Contributions into the plan will be permitted by anyone, including friends and family, with a lifetime limit of $200,000 which does not include government contributions or interest. While contributions may be received from anyone except the provincial government and have no annual limit, all contributions must be received before the beneficiary’s 60th birthday.

As an incentive for people to set up an RDSP and contribute into the plan, the Government of Canada has created the Canada Disability Savings Grant and the Canada Disability Savings Bond. The Grant was designed to encourage friends and family to contribute by providing generous matching contributions, while the Bond was designed to help those who may not have any friends and family in the position to help.

Highlights of the Canada Disability Savings Grant

When annual net income is equal to or less than $74,357 the grant will contribute:

$3 for every $1 contributed on the first $500.

$2 for every $1 contributed on the next $1,000.

When annual net income is over $74,357, the grant will contribute:

$1 for every $1 contributed up to $1,000.

The Grant can be received up to a maximum of $70,000 over a person’s lifetime, and only until the beneficiary turns 50 years of age.

Highlights of the Canada Disability Savings Bond

When annual net income is $20,833 or less, the Canada Disability Savings Bond will provide $1,000 per year without any personal contribution. The Bond is pro-rated if your income is between $20,883 and $37,178.

The Bond was created to make the RDSP accessible to persons with disabilities whose family and friends are not in a position to make contributions. The Bond can be received up to a maximum of $20,000 over a person’s lifetime, and only until the beneficiary turns 50 years of age.

Establishing and Managing an RDSP

Anyone who is eligible for the Disability Tax Credit can set up a plan. To find out whether you are eligible for the Disability Tax Credit you can contact the Canadian Revenue Agency or visit their website. In the case of a minor child, a parent or guardian can establish and direct the RDSP. In the case of an adult setting up a plan, they can set up a plan or can have a plan set up for them by a parent or legal guardian.

Impact on Federal and Provincial Benefits and Programs

The federal government has exempted the RDSP from affecting any federal support programs, such as CPP, OAS and GIS. For anyone living in British Columbia, Newfoundland, Yukon, and Saskatchewan, the plan is an exempt asset and you are free to use any income from your plan in whatever way you choose without affecting your income assistance.

Getting Ready for the RDSP

With the RDSP expected to become available from financial institutions in December of 2008, we are encouraging people to do two things in order to take full advantage of this plan:

  • Make sure you qualify for the Disability Tax Credit.
  • Make sure you file a 2007 tax return.

* Net income refers to a family’s combined net-adjusted income while the plan beneficiary is a minor. While they are an adult, net income refers to an individual’s net-adjusted income, and includes that of his/her spouse or common law partner.

We have been getting a lot of questions concerning the status of the RDSP lately, so I will give everyone a quick update.

The RDSP will become available in December of this year. Currently the Federal Government is working on finalizing the Regulations to accompany the legislation. The Regulations were made public for consultation in late March and received feedback from community members, financial institutions, NGO’s and other various stakeholders.

We are expecting the final Regulations to be out by the end of June at which point the Federal Government will be looking to draft agreements with financial institutions who are interested in offering RDSPs to their customers. After the Federal Government has drafted these agreements, the financial institutions in question will begin creating their systems required to administer and track the RDSPs.

As soon as we know which financial institutions are offering the RDSP we will be posting a list on this blog. We are expecting that you will be able to set up an RDSP at a local bank starting in December of this year.

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