People with disabilities and their loved ones 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 (RSDP). Designed to help build long term financial security for disabled persons, the RDSP makes it easier to accumulate funds by providing assisted savings and tax-deferred investment growth.
To qualify for a RDSP, you must:
- Be eligible for the Disability Tax Credit
- Be a resident of Canada
- Be less than 60 years of age
- Have a valid SIN
- The plan must be established by the disabled individual, unless he or she is not legally competent to sign a contact (Eg. Minor or mentally impaired).
Once an RDSP is set-up, there are four ways to put money in:
- Contributions by the account holder
- Contributions by people the account holder has authorized
- Federal grants and bondsTransfers from a qualified RRSP/RRIF/RPP
- Canada Disability Savings Grants (CDSG’s)
CDSG’s are matching grants that the Government will deposit into a beneficiary’s RDSP to help accumulate savings. The Government provides matching grants of up to 300% depending on the amount and family income.
CDSG’s are subject to a lifetime limit of $70,000 per beneficiary, and are payable until the end of the year in which the beneficiary reaches age 49 if the beneficiary remains a resident of Canada.
In addition to CDSG’s, lower income families have access to Canada Disability Savings Bonds (CDSB’s). The government may deposit up to $1,000 a year to the RDSP of a low income beneficiary.
The last point I would like to highlight is when you withdrawal funds. When withdrawing funds from an RDSP, it is important to be aware of the 10 year rule. CDSG’s and CDSB’s received in a 10 year period prior to a disability assistance payment must be repaid to the government. The purpose of this is to ensure that RDSP’s are used for long term savings.
Contact any one of our advisors to find out more about these tremendous savings plans and check out this link for information directly from Canada Revenue: http://www.cra-arc.gc.ca/rdsp/