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RDSP Overview

The Registered Disability Savings Plan (RDSP) is a long-term savings plan for persons with disabilities that will allow funds to be invested tax-free until the time the funds are withdrawn. Contributions to the plan can be made by anyone, including friends and family, and must be received before the beneficiary’s 60th birthday.  The maximum contribution that friends and family can make is $200,000.

In order to provide an incentive for people to set up an RDSP and contribute to the plan, the Government of Canada has created the Canada Disability Savings Grant and the Canada Disability Savings Bond. The Grant was designed to encourage friends and family to put money in by providing matching federal government contributions. The Bond was designed to help those who may not have any friends and family in the position to contribute.

Highlights of the Canada Disability Savings Grant
When annual net income* is equal to or less than $74,357 the grant will contribute:

$3 for every $1 contributed on the first $500.

Plus $2 for every $1 contributed on the next $1000

Maximum total grant per year: $3,500
 

When annual net income* is over $74,357, the grant will contribute:

$1 for every $1 contributed up to $1,000

Maximum total grant per year: $1000

The maximum RDSP Grant that an individual can receive is $70,000. The beneficiary will no longer be eligible for the grant after he/she is 50 years old.

Highlights of the Canada Disability Savings Bond

When annual net income* is $20,833 or less, the Canada Disability Savings Bond will provide $1,000 per year without any personal contribution. The Bond is pro-rated if your income is between $20,883 and $37,178.

The Bond was created to make the RDSP accessible to persons with disabilities whose family and friends are not in a position to make contributions. The Bond can be received up to a maximum of $20,000 over a person’s lifetime, and only until the beneficiary turns 50 years of age.



Establishing and Managing an RDSP

Anyone who is eligible for the Disability Tax Credit can set up a plan. To find out whether you are eligible for the Disability Tax Credit you can contact the Canadian Revenue Agency or visit their website.
                ENG: www.cra.gc.ca or call 1-800-959-8281
                FR: www.arc.gc.ca  or call 1-800-959-7383

In the case of a minor child, a parent or guardian can establish and direct the RDSP. In the case of an adult setting up a plan, they can set up a plan or can have a plan set up for them by a parent or legal guardian.

Impact on Federal and Provincial Benefits and Programs

The federal government has exempted the RDSP from affecting any federal support programs, such as CPP/QPP, OAS and GIS. So far for anyone living in British Columbia, Newfoundland, Yukon, and Saskatchewan, the plan is an exempt asset.  Individuals are free to use any income from their plan in whatever way they choose without affecting their income assistance.

Getting Ready for the RDSP

A Registered Disability Savings Plan is a trust arrangement between a holder and an issuer (a trust company in Canada). With the RDSP expected to become available from financial institutions in December 2008, people should do two things in order to take full advantage of this plan.

1. The individual with the disability has to be eligible for the Disability Tax Credit (DTC).  Even if your adult son or daughter was rejected before, try again.  The government has loosened the guidelines for the DTC.

2. The adult beneficiary has to have filed an income tax return, even if they are not making any money.  

* Net income refers to a family’s combined net-adjusted income while the plan beneficiary is a minor. When the beneficiary is an adult, net income refers to an individual’s net-adjusted income, and includes that of his/her spouse or common law partner.

Based on information provided by Planned Lifetime Advocacy Network - PLAN.  Check PLAN’s RDSP Blog at http://rdsp.wordpress.com/.  {mos_fb_discuss:no_discuss}