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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.

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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.

This year the new income levels for 2010 Canada Disability Savings Grant and Canada Disability Savings Bond were announced.  As I mentioned in the post New Income Levels for 2010!, the new income levels to receive the Bond for 2010 are changed every year to account for inflation.  For 2010, if your income is below or equal to $21,947, you are eligible for the full $1,000.  If your income is between $21,947 and $39,065, you are eligible for a pro-rated amount of the Bond.

This leads to the question, what is the formula to determine how much Canada Disability Savings Bond you will receive if your income is between $21,947 and $39,065?

To determine what amount you are eligible to receive, you need to use the following formula:

$1000 – [$1000 * (A-B)/(C-B)]

Where:

A= Family income, B=Lower threshold ($21,947) and C=Upper Threshold ($39,065).

For example, let’s imagine that someone with an income of $35,000 wants to figure out how much Canada Disability Savings Bond they are eligible to receive.

The amount of Bond would be determined by the following:
$1000 – [$1000 * ($35,000-$21,947)/($39,065-$21,947)] = $1000 – [$1000* ($13,053/$17,118)] = $237.47

One of the most common questions I have been receiving lately is “can I transfer my RDSP from one bank to another?”.  Quick answer, Yes.  The legislation does allow for the RDSP to be transfered from one financial institution to another.

Does this mean I can go down to the bank and transfer right now?  Maybe. Maybe not.

Many people I have chatted with have said that they were told by their financial institution that transfers are currently not possible because there is no Government RDSP Transfer Form.  True, currently there is not a Government RDSP Transfer Form (although it will be ready by the end of February 2010), but the Government is capable of accepting transactions from financial organizations opening or closing RDSPs as a result of a transfer.

What does this mean?

It means that financial institutions can electronically submit information to the Government opening an RDSP and have the option to indicate it is part of a transfer.  Once this application is received, the RDSP would have the status of “pending” until the prior RDSP (from the old financial institution) has been closed, at which time the status would change to “registered”.  Note that the old RDSP must be closed within 120 days for the new one to be deemed “registered”.

Financial institutions can also submit an electronic request to close an RDSP, and can indicate that the closure reason is due to a “transfer”.

So why are most financial institutions saying they cannot transfer yet?

As many of you are probably aware, there have been some delays in completing the electronic system requirements around the RDSP, and many financial institutions started off by registering RDSPs manually.  Some financial institutions may not have the electronic systems currently in place to transfer and are waiting for the RDSP Transfer Forms from the Government to come out early this year (probably end of February 2010).

When the RDSP Transfer Forms come out early this year, this should allow all the financial institutions to transfer RDSPs across to another financial institution.  We will post an update when these forms come online.

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.

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

PLAN recognized Prime Minister Harper with it’s highest honour yesterday – an honourary lifetime membership – in recognition of the implementation of the Registered Disability Savings Plan.  The Prime Minister was joined by Steven Fletcher, Minister of State for Democratic Reform, and Rick Hansen, President and CEO of the Rick Hansen Foundation at an event to raise awareness of Canada’s new RDSP.  The event was hosted by the Burnaby Association for Community Inclusion.

To see video of Prime Ministers speech click on this link: http://vimeo.com/7339976

Excerpt from the official press release:

“While barriers still exist, people like Rick Hansen are a testament to what can be accomplished through courage and determination,” said the Prime Minister.  “Through initiatives like the Registered Disability Savings Plan, our government is helping Canadians with disabilities make even greater contributions to our country.”

Click here for the entire Press Release

Rob Bromley, Chair of PLAN, Prime Minister Stephen Harper, and Jack Styan, Executive Director of PLAN

Rob Bromley, Chair of PLAN, Prime Minister Stephen Harper, and Jack Styan, Executive Director of PLAN at the announcement on the RDSP

Prime Minister Stephen Harper

Prime Minister Stephen Harper speaking at the RDSP announcement, with Rick Hansen, CEO, Rick Hansen Foundation and the Honourable Steven Fletcher, Minister of State for Democratic Reform

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

The Registered Disability Savings Plan was designed to be a long-term option for those looking to plan for the future financial security of themselves or their family member.  As such, the plan will be the most beneficial for those who are able to open and save over a number of years.  For many people, they may not have the option of saving over a larger number of years, and will therefore look to use the plan somewhat differently then those (for instance) who are saving for a child and can start early.

A friend of mine was recently explaining how she was having some trouble explaining to the bank that she didn’t want to receive any grant and bond, and instead wanted to simply put in her money so that she could take out payments whenever she wanted.  At 48, she realized that she was only eligible for two years of grant, and wanted to be able to use the RDSP right away, instead of waiting to take out payments at the age of 60.

Now from a purely financial standpoint, her deciding to forgo receiving two years of the grant doesn’t make sense.  In order to maximize the amount of money in the plan, it would make more sense to take advantage of the grant.  I mean, who wouldn’t want free money into their plan?

That would be true if it were all about money….but it’s not.

For some people like my friend, they have been restricted from using money they receive in the manner they want.  Although different for each jurisdiction, in most provinces the regulations tied to those receiving disability benefits mean that the amount of money you can save and spend is restricted, along with restrictions on what you can spend it on.  For someone who has had to justify every purchase they ever make to make sure they don’t lose their disability benefits, having the opportunity to put money away, and then spend it on whatever they want is a very exciting prospect.

So why is there confusion?

1)  Many people are still uncertain as to how you can take out payments, and what are the rules and restrictions (see my post on payments by clicking here) .

2) The launch of the RDSP happened very quickly and many of the financial institutions (along with everyone else) are still trying to wrap their heads around what is allowed and what isn’t.

3) Financial Advisors are trained to make you money, so if you are proposing to use the plan in a way that makes less money it will be important to explain why.

4) Financial institutions are not required to allow every type of payment, only payments determined by the Lifetime Disability Assistance Payment formula.  From what we have seen so far, most have been very flexible around the types of payments they allow and have not restricted payments to the formula.

The KEY: Always make sure to outline your intentions and plan for the RDSP.  Answer the question:  How do I want to use it?  When do I want to take out payments? Do I want to use it as a long term savings plan, or do I want to begin using it now? What type of payments do I want to take out, lump sums or annual payments?

By letting your financial advisor know how you intend to use the plan, you can make sure that there is no confusion, and that it is best suited for you.

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