Canada has lead the way by offering tax-assisted savings plans to provide financial security for people with disabilities. Yet most are unaware of the Registered Disability Savings Plan (RDSP).
Many people living with disability who qualify for the Disability Tax Credit, as well as their parents and caregivers, are unaware that the government provides a long-term savings plan to assist in saving for the future. Part of the problem is the financial services industry has done a poor job in spreading the word that these programs exist. In fact, as of March 2012 approximately 10% of all eligible individuals who receive the DTC are participating in the program.
RDSP in a nutshell
Similar to an Registered Education Savings Plan (RESP) your money will grow tax-sheltered when inside an RDSP. Also similar to an RESP the contributions made are non tax-deductible.
In addition to your contributions there are federal government programs which, depending on your income, can provide up to $90,000 in grants and savings bonds over the course of the disabled persons lifetime.
Our provincial governments have also encouraged the use of RDSPs. RDSPs are currently exempt under provincial disability benefit programs. Most provinces have completely exempted RDSP income meaning people can save without threatening their present income benefits.
All-in-all the RDSP is an extremely powerful tool the federal government has provided to encourage people with disabilities and those who care for them to become more financially secure.
Parents of disabled children and disabled individuals can open RDSPs on their own behalf. However, they must meet certain conditions.
In order to qualify and be eligible for an RDSP you should fulfill the following 3 requirements:
1. Less than 60 years old when contributions are made.
2. A Canadian resident with a social insurance number.
3. Must be eligible for the disability tax credit (DTC).
Grants and Bonds
Depending on family income and how much is contributed, the federal government will give a grant of up to $3,500 a year. The federal government will add a bond of up to $1,000 a year for lower income RDSP owners, even if no contribution is made that year. These grants and bonds are available until the year the beneficiary turns 49. All grant and bond money must remain in the plan for at least 10 years.
There is much to learn about the criteria for grants and bonds under the RDSP, and you can start here.
Here’s the bottom line: If you are a disabled adult or a caregiver for a disabled person, even one with no income, you should be applying for the disability tax credit, set up an RDSP and apply for grants and bonds.
If you have any questions about this article or would like the assistance of one of our licensed professionals, please call us at 1.416.759.5453 or email us at firstname.lastname@example.org.