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A number of you have expressed frustration in not being able to transfer your RDSP from one financial institution to another.  Part of that frustration has been that the messages have been conflicting – you should be able to transfer…you can’t transfer yet…you will be able to transfer soon…we don’t know when you will be able to transfer.

We have checked in with the federal government and financial institutions in an effort to find out what is going on, what the solutions are and how we can move this agenda forward.

First, we can report that all parties are aware of the problem and people’s frustrations.

As a lay person, I had a difficult time understanding what all the difficulty is about.  But in speaking with people, I came to understand that it’s a bit more complicated.  The crux of the matter is determining what information needs to be transferred along with the RDSP.  Financial institutions need to maintain information to be able to calculate holdback amounts, taxes, payments permitted etc.  Not only that, they all need to agree on what they will transfer and maintain so that when they receive a transferred RDSP, they have the appropriate information or if they are sending an RDSP, they will send the right information.  All of this takes time.

While some of you will be frustrated waiting one day longer, it appears that we are still about three to six months from everything being worked out and transfers occurring in a pretty easy manner.  That would be somewhere between January and March (and possibly before).

We have heard of people managing to get funds transferred – but it isn’t an easy process at the moment.   If you absolutely can not wait, then we’d recommend that you take it up the line within the bank – some banks might be willing and able to make it work for you.

One of the most challenging aspects of future planning is finding people to shepherd the plan far into the future.  Therefore, it is not surprising that setting up an RDSP presents the same issue – who can help manage the financial aspects of the plan if help is needed?  If you haven’t opened an RDSP yet, read on.

For those who need assistance in managing their finances, someone with the following qualities is required:

–          The must know and care for you or your loved one

–          They must know about RDSP’s

–          They must be trustworthy

–          They must be willing

–          They must be a long term prospect

Finding the right person may be as easy as asking a sibling or as difficult as approaching an acquaintance or going to court. However, taking the time and care to do so provides both practical assistance in managing an RDSP asset and peace of mind in knowing that asset is in good hands.

Step 1:  Get the facts!

The person who oversees an RDSP is called a holder.  They are the RDSP’s shepherd.  They oversee contributions, investments and payments.

The person who the RDSP is set up to assist is called the beneficiary.

There are three possibilities for a holder:

  1. The beneficiary is a child (17 years or younger) – Parents or legal guardians MUST be the holder until they are 18 and then parents MAY continue as the holder.  If they are able, the beneficiary can become sole or co-holders when they are 18 (or older).
  2. The beneficiary is 18 or older and able to manage independently – The beneficiary MUST be the holder unless another person is given legal authority to manage the RDSP.
  3. The beneficiary is 18 or older and needs assistance in managing the RDSP – This is where you need to find someone who fits the ‘job description’ checklist above.
    • In BC, a Representative can be appointed under the Representation Agreement Act. Check out www.plan.ca or www.nidus.ca for more information and support.
    • You may apply for an “adult guardianship” order.  The legislation is different in each province and the “adult guardian” has different names from province to province (Committee – BC; Trustee – AB; Adult Guardian – ON; Curator – PQ).  We don’t recommend guardianship – see our book Safe & Secure (link to information about Safe & Secure) for more information – but you may not have another option.

Step 2. Act!

Get more information about your options:

–          Talk to your bank – Are there any obstacles around holdership and what does the bank recommend?

–          Talk to PLAN – You are seldom the first person to face a challenge.  Find out what others have done by reading the rdsp.com blog and signing up for our ezine for regular updates (links)

–          Talk to family and friends.  No matter the solution, you don’t want to be the lone shepherd on the journey.

Step 3.  Get Involved! – Advocacy

Our advocacy motto is: “When it’s broken, fix it!”

PLAN lobbied the Minister of Finance to create a federal Representation Agreement for the RDSP.  He determined that the issue was provincial but brought measures to carry forward the Grant and Bond so people wouldn’t be penalized. This gives the provinces time to address the issue of representation and support around managing an RDSP.

The next advocacy step is to work directly with each of the provinces.  At PLAN, we are committed to seeing changes in legislation that support people to make their life decisions and manage their affairs without losing their rights.

PLAN is also working closely with RBC to explore bank-generated solutions to making the RDSP more accessible to adults who do not have legal capacity. They are a committed partner and dedicated to making the RDSP available and accessible to as many people as possible.

If you are interested in working on this issue with PLAN, email Jack Styan at jstyan@plan.ca

Hopefully you don’t go to sleep at night wondering how to explain payments from RDSPs. We do!!!

It would be easy to take the attitude – “It’s complicated.  I’ll learn it when I need to.”  At PLAN, we don’t think that’s good enough.  It’s an investment.  It’s an insurance policy.  It’s the future.  We want to know that it will work so we can go to sleep at night with peace of mind – that it will work for our family members. 

In planning for the future over many years, families tell us that peace of mind comes with knowledge and action.

Here’s a summary of our latest, greatest explanation of payments.  (The full detailed document is attached at the bottom of the post)

Summary Table

Payment Type Federal Government Contributions exceed Private Contributions (at the beginning of the year) Private Contributions exceed Federal Government Contributions (at the beginning of the year)
LDAP requests when beneficiary is under age 60 – permitted- maximum of LDAPs combined with other payments must be limited by formula – permitted- LDAPs limited by formula
LDAP requests when beneficiary is age 60 or over – required- maximum of LDAPs combined with other payments must equal amount determined by the formula – required- formula determines the maximum LDAP payment
Flexible DAP requests when beneficiary is under age 60 – permitted- maximum of Flexible DAPs combined with other payments must be limited by formula – permitted- no limit on amount
Flexible DAP requests when beneficiary is age 60 or over – permitted- maximum of these payments combined with other payments must equal amount determined by the formula – permitted- no limit on amount
Beneficiary-requested DAPs – permitted between the ages of 27 and 59-  maximum of these payments combined with other payments must be limited by formula – not permitted
Terminal-iIllness DAPs – permitted whenever a physician provides a certificate that the beneficiary will not live longer than 5 years- no limit on amount – permitted whenever a physician provides a certificate that the beneficiary will not live longer than 5 years- no limit on amount

Payments – Detail – May 2010

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.

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.

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

As many of you probably are aware, throughout our discussion we have consistently tried to provide a clear explanation of the type of payments that you are allowed to take out of an RDSP. To see what type of payments the plan allows, you can view the post Payments from an RDSP: An Effort to Make it Understandable.  In today’s post I want to highlight that although the legislation and regulations allows for all of these payments to be withdrawn from the plan, it only requires financial institutions to provide the formula payments (or Lifetime Disability Assistance Payments).  Again, a financial institution does not have to offer lump sum payments to come out of the plan if they do not want to.

This is why, in the post “Mapping your Plan“, we highlight the importance of running through with your financial advisor how you want to use the plan.  By doing so, you can find out then and there whether you are allowed to take out lump sum payments.  If you find out that they do not allow lump sum payments and you wanted to be able to take out lump sums, then you may want to look at another financial institution.  Currently the only bank which has verified that they allow all types of payments is the Royal Bank of Canada.  In all likelihood many of the other banks will most likely allow all types of payments but it will be important that you find this out when planning for your RDSP, as we have heard of a few financial institutions restricting lump sum payments.

This probably won’t be an issue for many people, as I expect a lot of people to simply take out the formula payments (lifetime disability assistance payments), but for those who are using the RDSP differently, you will want to verify this option.

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.

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