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For those of you wanting some help filing your 2008 tax return, we have developed a 16 page Tax Bulletin designed to make it easier for you to access all the money you are eligible for and take some stress out of filing.  Available for free from www.rdsp.com, the tax bulletin is a combination of  expert, professional, and lay advice to help individuals and families navigate the complexities of their tax return.

In the Tax Bulletin you will find articles on:  the Disability Tax Credit,  the Medical Expenses Credit, the Tax Free Savings Account, the Registered Disability Savings Plan, Top Ten Tax Tips from Tax Expert Jamie Golombek, the Canada Child Tax Benefit, Taxation of Trusts, the Caregiver Credit, Estate Tax , the Working Income Tax Benefit, and much more.

If you would like to receive an electronic version of PLAN’s 2009 Tax Bulletin Navigating Your 2008 Tax Return for FREE, you can follow this link to RDSP.com and Join PLAN for free.  Once you put in your information you will be sent a follow-up e-mail with the Tax Bulletin attached.

If you would like a hard-copy you can contact PLAN at 604-439-9566 or http://www.plan.ca and have it sent to you for a small cost.

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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

Not including BC, Newfoundland and Yukon (who have all already exempted the RDSP), many provinces/territories are in the midst of deciding how the RDSP will affect someone who is receiving Disability Benefits. We decided to put together a Top 10 list of why we think it is important these provinces/territories exempt the RDSP as an asset and income. If you have any reasons you would like to include feel free to post a comment and add to our list.

TOP 10

1. Poverty reduction – Governments cannot provide for the future financial security and social well-being of people with a disability on their own. Governments need to begin forging a new relationship with families to enable and encourage their contributions. As many new programs such as SEDI’s Independent Learning Accounts (ILA’s) are demonstrating, the ability to accumulate assets and save for the future has a direct impact on poverty reduction. In fact, when the Newfoundland Government decided to exempt the RDSP from asset and income tests, they made this decision as part of their Provincial Poverty Reduction Strategy (click here).

2. Positive Messaging – Exempting the RDSP as an asset and income would send a strong message to families that Provincial Governments understand their ability and determination to help their family member or friend with a disability. Allowing the full benefits of the RDSP would go a long way towards rebuilding trust between government and communities, and stimulate a positive partnership between the two. Families and friends of people with disabilities need to begin planning beyond their lifetime and need the security of clear public policy that underlines provincial governments’ willingness to help.

3. Establish a New Vision Exempting the RDSP would help establish a new vision that acknowledges the huge contribution that people with disabilities have to make to the community. Allowing people with disabilities and their families the opportunity to contribute towards their own well-being will go a long way towards eradicating the notion that people with disabilities have little to contribute. Increased financial security will encourage people with disabilities to enter into the community and participate in activities, employment, volunteering, education, etc.

4. Equality – British Columbia, Newfoundland, and Yukon have all exempted the RDSP from any asset and income tests. If other provinces/territories do not fully exempt the RDSP from their own asset and income tests it will prove to be a disadvantage and unequal treatment of people with disabilities in other provinces/territories.

5. Family Resiliency – Often there are significant restrictions and penalties around familial support directed towards a person with a disability receiving Disability Benefits. Families and friends who are in a position to help are often unable for fear they will disqualify their loved one from receiving their much-needed supports. Exempting the RDSP would promote the resiliency of families/people to solve some of their own problems, especially for a marginalized disability population that has significantly higher costs for daily living.

6. Future Government Savings and Revenues – The RDSP will generate future government program savings and revenues as people with disabilities become more secure financially. The residual effects of allowing people with disabilities to save for their future will alleviate some of the strain from government supports and programs.

7. Maximizing Federal Contributions – The RDSP provides no cost to provincial governments and has the potential to leverage huge amounts from the federal government. By accommodating the RDSP provincial governments can inject a significant amount of money into their respective disability community without raising their costs for programs and supports.

8. Encourage Home Ownership – For many people with a disability the likelihood of ever owning a home is pretty remote. With many of the current provincial welfare systems discouraging the accumulation of savings or employment, many people with disabilities will have to remain in institutions or group homes. This is worrying considering the majority of Canadians view owning their own home as one of the essential determinants of their social and financial well-being. The RDSP provides people with disabilities the opportunity and incentive to save for a home, and in realizing this dream, become more active and involved in the community.

9. Financial Literacy – In most provinces the legislation and regulations surrounding those receiving disability benefits is convoluted and complicated. Simply trying to understand all the rules and regulations associated with supports and programs is arduous, time-consuming, and often impossible to manage. Providing a full exemption of the RDSP will simplify the process of understanding the plan and will ensure everyone who is eligible for the RDSP can benefit from it. If provinces fail to exempt the RDSP many individuals and families will simply refrain from setting one up as they do not want to be disqualified from receiving disability benefits.

10. Community Support – The support for a full exemption of the RDSP is immense and spans across the country. Any province that takes this monumental step will receive widespread support for their position and will solidify themselves as an example of a forward-thinking government which understands the needs for new solutions in an ever-changing societal and political environment. As we have seen in BC, Newfoundland, and Yukon, provincial governments who exempt the RDSP are receiving well-deserved praise and support for their efforts to move the disability agenda in a positive and progressive direction.

If you are interested in what is happening in the provinces there was a really interesting article in the Globe and Mail today written by Andre Picard. It is all about the RDSP and the need for provinces to exempt the RDSP as an asset and exempt withdrawals. It is really well written and asks the provinces to support the RDSP and move the disability agenda in the right direction. Here is an excerpt from the article:

“The disability community does not have powerful lobbyists and chummy connections in corridors of power. But that is no reason to ignore their needs and exploit their financial vulnerabilities. RDSP plans go on sale in December. There is no excuse for every province and territory to not have committed to amend its rules by that time. Parents of children with disabilities – bipolar disorder, autism, spina bifida and countless other chronic conditions – already have a tremendous burden of care. When their children grow into adulthood – as the vast majority now do thanks to medical advances – the cold reality is that most will be condemned to a life of poverty.”

To read the rest of this article you can click here: http://www.plan.ca/documents/GlobeMail07-31-08.pdf

It still looks like things are moving along and that the RDSP will become available in December of this year.  The Federal Government is on track to be prepared for the launch and are currently dealing with the Financial Institutions that will be offering the RDSP to their clients.  We have heard that somewhere between 12-14 Financial Institutions (from across Canada) are in the midst of drafting agreements for the Federal Government, and once approved, will begin preparing for the launch in December.

We have been getting a lot of questions lately asking which Financial Institutions will be offering the RDSP.  At the moment this information is not public, but should become available in the next few months.  As soon as we know which Financial Institutions will be offering the RDSP we will be posting a list of organizations and detailing their particular plans.

If you and your organization are interested in outreach for the RDSP you may want to keep an eye on HRSDC as they will be sending out a Request for Proposals for different organizations to help inform Canadians about the RDSP.  Financial literacy around the RDSP is going to be an important piece of work as there will be many Canadians with a disability who are eligible for the Disability Tax Credit but have never applied for it in the past.

If you know anyone who may be eligible for the Disability Tax Credit make sure to encourage them to apply to the Canadian Revenue Agency.  As well, for anyone looking to set up an RDSP in December, make sure you file a 2007 tax return as your prior years tax return will determine the amount of Grant and Bond you receive.  If you want more information on applying for the Disability Tax Credit you can go to the Canadian Revenue Agency’s website at http://www.cra-arc.gc.ca/E/pbg/tf/t2201/.

If you are interested in seeing what the RDSP could potentially provide for you or your family member with a disability make sure to check out our new RDSP Calculator, Version 1.0.

Many people have been asking us who they should contact in their provinces if they have more questions on the Registered Disability Savings Plan (RDSP). If you are unsure of your provincial government’s plans for the Registered Disability Savings Plan, we encourage you to contact your provincial government representative or your Minister responsible for disability income assistance.

You can download the following list of provincial government ministers with links to their contact information: Provincial Ministers responsible for Disability Income Assistance – Contact List

This list was compiled in July of 2008.

Make sure to take a look at the A Primer on Special Needs blog for a really interesting post on the RDSP and trusts. Michelle Morgan Coole, a really savvy legal analyst from Nova Scotia argues that the RDSP, with its raised asset allowance and treatment of income, should lead to an improvement of the treatment of trusts.

To view the article click on this link: http://specialneeds-ns.blogspot.com/2008/06/gone-gone-gone-youve-been-gone-too-long.html

When looking at the RDSP we have found it helpful to compare it to the Registered Retirement Savings Plan (RRSP) and Registered Education Savings Plan (RESP). As the RRSP and RESP have been around for a long time, people can relate a lot more easily to the RDSP when we examine the incentives, treatment of income, and withdrawals from all three.

I think the first question that most people ask when looking at the RDSP is: what is the incentive to contribute into the RDSP other than helping your family member or friend with a disability? I think the RRSP is the main reason this question pops up so often and has conditioned us to look for a return on this type of plan. So what are the incentives for all three plans?

With the RRSP the incentive is a tax deduction. If you contribute into an RRSP you receive a tax deduction from the government based on the value of the contribution and depending on your income. As you pay more tax on higher incomes, the more income you have the larger your tax deduction.

With the RESP the Canadian Government provides incentive to contribute into the plan through the Canada Education Savings Grant. The CESG will contribute up to $200 on the first $500 you save annually in your child’s RESP, and up to $400 on the next $2,000. Unlike the RRSP, the RESP does not provide a tax deduction.

The RDSP is very much like the RESP in terms of incentives as it provides the Canada Disability Savings Grant that matches contributions into the plan. For someone with an income below or equal to $74,357 they can leverage $1500 for the first $500 contributed into the plan, and $2000 for the next $1000, up to $70,000 over 20 years. For someone with an income above $74,357 they can receive a matching grant of $1000 on the first $1000 contributed, up to a maximum of $20,000 over 20 years.

The similarity of the plans also extends to the treatment of income within each plan. When individuals receive contributions into the plan, those funds then become “sheltered” from any taxation while they are in the plan. This means that for the RRSP, RESP, and RDSP, you can receive contributions into the plans but will only be taxed on withdrawals.

Another difference between the plans is the withdrawals. With the RRSP, withdrawals made from the plan are fully taxable, but the expectation is that you will be older and therefore in a lower tax bracket. With the RESP and RDSP withdrawals made from the plan are only partly taxable. In the case of the RDSP, this means that the portion of the plan that is made up of contributions is non-taxable, but the portion of the plan which is grant and/or bond, and income is taxable. The important thing to remember in the case of the RDSP is that it will be taxed in the hands of the beneficiary, and therefore more likely to receive significantly lower taxation.

Good news!  We have been in the process of developing an RDSP calculator and are close to launching it on our blog.  This calculator will allow people to see exactly what kind of growth and payments they will see in an RDSP over their lifetime.  The calculator will allow you to see:

– the annual amount of Disability Savings Grant you will receive;

– the annual amount of Disability Savings Bond you will receive;

– the total yearly government contribution;

– the annual contributions of family and friends;

– the total annual value of the RDSP over its lifetime;

– the age at which you can begin to withdraw without penalty;

– if you withdraw within 10 years of receiving the grant and bond, how much it will impact your plan value;

– the impact of your provincial benefits on the RDSP;

– the annual disability payments you would receive;

This calculator will let you run through different scenarios so that you can understand how much potential growth there is within the RDSP.  By choosing different options, such as:

– whether you want to invest the RDSP very conservatively, conservatively or more moderate;

– whether there will be potential lump sum contributions;

– whether you foresee family and friends contributing on an annual basis;

– when you will begin the plan;

-when you want to start receiving payments from the plan;

– what is your taxable income;

you will be able to gage how the RDSP will work for you.  As you can probably tell, we are very excited that we are going to be able to provide you with this tool.  We are expecting to launch this calculator by the end of this month.  We have been running tests on it to ensure it’s accuracy (with the help of financial planners) and are in the process of making it “web-ready”.

If you get a chance, make sure to check this blog in the upcoming weeks and try out our calculator when it becomes available.

Currently BC, Alberta, Newfoundland, Saskatchewan, Manitoba, Ontario, Nova Scotia, NWT and Yukon have exempted the RDSP as an asset and/or income. Quebec and New Brunswick have exempted the RDSP as an asset but are capping the amount of income that you are allowed to withdraw from the plan (QB $305 exempt monhtly and NB $800 exempt monthly). Prince Edward Island has announced that they will exempt the RDSP as an asset and income up until the low income threshold (see http://www.rdsp.com for more details), and Nunavut has currently not indicated how they will treat the RDSP.

We will be updating this blog consistently and letting you know as soon as the provinces announce their intentions.

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