Registered Disability Savings Plan (RDSP)
Whenever I talk to clients who have disabled family member, they usually show huge concern whether there will be enough financial resources for the disabled dependent. It is not hard to understand that people with special needs and their loved ones could face a distinct set of financial challenges throughout their lives. To help address these challenges, the Government of Canada introduced the Registered Disability Savings Plan (RDSP) back in 2008. This is a wonderful saving tool designed to help building long-term savings for disabled persons. The RDSP makes it easier to accumulate funds by providing assisted savings and tax-deferred investment growth.
How Does It Work?
There are two key benefits within the RDSP, they are the Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Grants (CDSBs).
The Canada Disability Savings Grants (CDSGs) is a matching grant where the government will deposit the funding into your RDSP account based on your family income and your contribution. The maximum lifetime benefit per beneficiary is up to $70,000. Although it varies from each individual case, many families that I’m working with did receive up to 300% of the matching grants on a portion of their contribution.
To provide even more assistance for low income families with disabilities, there is the Canada Disability Savings Bonds (CDSBs). Unlike the matching grant, the disability savings bonds do not require any contribution. The government will review solely on the family income. If the income is not beyond the program’s limit, up to $1000/year will be deposited into the RDSP account. The maximum lifetime benefit per beneficiary is up to $20,000.
Who is Eligible for RDSP?
A Canadian resident with SIN, contributions to the RDSP can be made until the end of the year in which the beneficiary turns 59, and one must be eligible for the Disability Tax Credit (DTC).
However, the government grants and bonds will only be paid until December 31 of the year the beneficiary turns 49. The DTC is available to individuals who have mental or physical impairments that markedly restrict their ability to perform one or more of the basic activities of living (i.e., speaking, hearing or walking). The impairment must be expected to last a period of one or more years, and a physician must certify the extent of the disability. Individuals can apply to the Canada Revenue Agency (CRA) for the DTC using form T2201.
This article is for general information only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please consult an appropriate professional regarding your particular circumstances. This article does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation. References in this article to third party goods or services should not be regarded as an endorsement of these goods or services. This article is intended for Ontario, Canadian residents only and the information contained herein is subject to change without notice. The owner of this article is not liable for any inaccuracies in the information provided.Image Courtesy Stuart Miles/ FreeDigitalPhotos.net
Investment Fund Advisor | Investia Financial Services Inc.
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