Help­ing Cana­di­ans with dis­abil­i­ties save

The Guardian (Charlottetown) - - BUSINESS - Dick Young This col­umn, writ­ten and pub­lished by In­vestors Group Fi­nan­cial Ser­vices Inc. and In­vestors Group Se­cu­ri­ties Inc., presents gen­eral in­for­ma­tion only and is not a so­lic­i­ta­tion to buy or sell any in­vest­ments. Con­tact your own ad­viser for spe­cific

Thou­sands of Cana­di­ans have opened a Reg­is­tered Dis­abil­ity Sav­ings Plan (RDSP) since the pro­gram was in­tro­duced in 2008. Thou­sands more who qual­ify have not. Here’s what you need to know.

An RDSP is a fed­eral gov­ern­ment sav­ings pro­gram that en­cour­ages par­ents and oth­ers to save for the long-term fi­nan­cial se­cu­rity of a dis­abled per­son who is el­i­gi­ble for the Fed­eral Dis­abil­ity Tax Credit (DTC).

The ben­e­fi­ciary and/or their fam­ily and friends can con­trib­ute to an RDSP and any in­vest­ment growth and in­come those con­tri­bu­tions gen­er­ate will ac­cu­mu­late on a tax-de­ferred ba­sis. Con­tri­bu­tions are not tax-de­ductible but can be made by any­one au­tho­rized by the holder of the plan up to max­i­mum life­time con­tri­bu­tions of $200,000 per ben­e­fi­ciary.

The Canada Dis­abil­ity Sav­ings Grants (CDSG)* is a match­ing pro­gram where a grant of up to 300 per cent of con­tri­bu­tions is avail­able, de­pend­ing on the amount con­trib­uted and the fam­ily in­come of the ben­e­fi­ciary. The max­i­mum an­nual grant room gen­er­ated per year is $3,500, to a life­time max­i­mum of $70,000 re­ceived per ben­e­fi­ciary.

The Canada Dis­abil­ity Sav­ings Bond (CDSB)* is avail­able to low and mod­est in­come Cana­di­ans ir­re­spec­tive of plan con­tri­bu­tions. The max­i­mum an­nual bond room gen­er­ated per year is $1,000, to a life­time max­i­mum of $20,000 re­ceived per ben­e­fi­ciary.

When money is paid from an RDSP to the dis­abled ben­e­fi­ciary, it is called a Dis­abil­ity As­sis­tance Pay­ment (DAP). DAPs are one-time lump sum pay­ments from the RDSP to a ben­e­fi­ciary or a ben­e­fi­ciary’s es­tate, but are re­stricted where the plan value con­sists pri­mar­ily of gov­ern­ment-funded ben­e­fits. Life­time Dis­abil­ity As­sis­tance Pay­ments (LDAPs) are an­nual pay­ments that must be­gin no later than the end of the cal­en­dar year in which the ben­e­fi­ciary turns age 60.

The por­tion of the DAP that re­lates to reg­u­lar con­tri­bu­tions is non-tax­able. The rest, which re­lates to the fed­eral con­tri­bu­tions (CDSB and CDSG) and in­come or growth from the RDSP ac­count, will be taxed as in­come to the ben­e­fi­ciary.

Ex­cept in cases where the ben­e­fi­ciary has a di­min­ished life ex­pectancy, RDSP with­drawals will re­sult in a pro­por­tional re­pay­ment of CDSG and CDSB paid into the plan in the 10 years pre­ced­ing the with­drawal. The best strat­egy: start con­tribut­ing early and leave the money in the plan for at least 10 years.

DAPs do not af­fect el­i­gi­bil­ity for Canada Pen­sion Plan Dis­abil­ity ben­e­fits or fed­eral in­come-tested ben­e­fits, and most pro­vin­cial and ter­ri­to­rial so­cial as­sis­tance pro­grams ex­empt RDSPs/DAPs from their as­set and in­come el­i­gi­bil­ity tests.

RDSPs are worth con­sid­er­ing if you or a fam­ily mem­ber lives with a dis­abil­ity. Talk to your pro­fes­sional ad­vi­sor about what’s best for your sit­u­a­tion.

*The Canada Dis­abil­ity Sav­ings Grant (CDSG) and the Canada Dis­abil­ity Sav­ings Bond (CDSB) are pro­vided by the Gov­ern­ment of Canada. El­i­gi­bil­ity de­pends on fam­ily in­come lev­els. Speak to an In­vestors Group Con­sul­tant about spe­cial RDSP rules; any re­demp­tion may re­quire re­pay­ment of the CDSG and CDSB.

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