Registered Disability Savings Plan - RDSP

Hon. Jim Flaherty
Thank You for the RDSP!

Registered Disability Savings Plan (RDSP)

For the 2009 RDSP grants and bonds applicatios can be made until December 31, 2009. You have a choice to open an account at the following financial institutions: BMO, RBC, CIBC and FMOQ (in Quebec only).

The Registered Disability Savings Plan, which was included in the federal budget this spring, is one of the most significant pieces of legislation affecting people with disabilities in recent history. The RDSP represents a way for families to provide for the future financial security of their family members with disabilities. It will give families and people with disabilities more control in their lives. As many as 745,000 Canadians with disabilities and their families could benefit.

RDSP is the result of an initiative advocated by a group of organizations led by the Vancouver-based Planned Lifetime Advocacy Network (PLAN) and its affiliates (Lifetime Networks Ottawa is one of them), and the hard work for the past five years of a dedicated team led by PLAN's founder and President, Al Etmanski.

RDSP consists of three components: contributions by the family and friends, grants and bonds by the Canadian Federal Government.

The salient features of RDSP are:

Note: income threshold levels are shown for 2008.

Eligibility

The beneficiary must

qualify for the ‘disability tax credit' or disability amount in the Income Tax Act
be approved by Canada Revenue Agency (CRA) as ‘markedly restricted' in the activities of daily living in one or more of several ways for an extended period
be a Canadian resident
have a SIN number

Contributions to the RDSP Trust

are not tax deductible
are permitted up to age 59 of the beneficiary
there is a lifetime maximum of $200,000
there is no annual limit
anybody can contribute to the RDSP Trust: family members, friends, even the beneficiary
no refund of contributions to contributors
inside the RDSP Trust interest accrues tax-free

RDSG - Registered Disability Savings Grants

RDSP grants are income sensitive
there is matching of contributions up to $1,500 at the rate of 100%-300% based on the family income
if the family income is less then $75,770 then the first $500 is matched at the rate of 300%, the next $1,000 @ 200%
for family income above $75,770 the first $1,000 is matched at the rate of 100%
the maximum amount of the grant in any year is $3,500
there is lifetime limit of $70,000
RDSP grants are given up to age 49
RDSG grants are locked in for 10 years

RDSB - Registered Disability Savings Bonds

RDSP bonds are income sensitive, the family income most be less then $37,884 to receive it in any given year
the maximum amount of the RDSP bond is $1,000 in any year
there is a lifetime limit of $20,000
if the family income is less then $ $21,229 the bond is $1,000
if the family income is between $21,229 and $37,884 the amount of the bond diminishes with increasing income until the upper limit of the scale, $37,884 is reached
RDSP bonds are paid up to age 49
RDSP bonds are locked in for 10 years

Withdrawals from the RDSP plan:

can be started any time
must start at age 60
once started must continue
the maximum annual payout is based on the life expectancy of the beneficiary subject to the available - not the 'locked in' - RDSP grants and bonds in that particular year
one-time payout are allowed under certain conditions, but must be specified at the time the plan is set up

Closing the RDSP plan:

it can be closed at any time
on closing he following amounts will be paid to the beneficiary or its estate
contributions and their eared interest
grants and bonds that have been in the plan for 10 years or more
'locked-in' grants and bonds (portion that has been in the plan less then 10 years) will be returned to the government

Taxation:

Capital contributions withdrawn from the RDSP will not be taxed, as the tax has already been paid on these sums the following will be taxable in the hands of the beneficiary, as they are withdrawn:

Accumulated investment income on family's contributions
Government (RDSP) grants, bonds and accumulated investment income on them

Availability:

It will be available from any number of licensed financial institutions as a product. At the present it is available only from BMO, CIBC, RBC, Scotiabank, TDCanada Trust and FMOQ (in Quebec only).

Provincial impact:

As of today (March 13, 2009) the following provinces exempted RDSP when calculating provincial social benefits:

Full exemption:
- Alberta, Manitoba, Ontario, Newfoundland-Labrador, British Columbia, Saskatchewan, Nova Scotia and Yukon
Partial exemption:
- Quebec, Prince Edward Island, Northwest Territories and New Brunswick
Nunavut so far has not stated the impact of RDSP on the benefits of its provincial social program.

For more information visit

RDSP Advisor