RDSPs

Registered Disability Savings Plans

A registered disability savings plan (RDSP) is a plan that is intended to support parents and others in saving for the long term financial security of a person who qualifies for the Disability Tax Credit (DTC).

RDSPs - The Highlights

  • Contributions are not tax deductible and may be made until the end of the year in which the beneficiary turns 59.
  • The beneficiary must remain disability tax credit eligible for the plan to remain open.  The plan may have to be de-registered if the beneficiary is no longer eligible for the disability tax credit.
  • The beneficiary may be the plan holder if they are legally able to enter into a contract.  If the beneficiary is unable to enter into a contract, a qualified person who is legally authorized to act for the beneficiary can open an RDSP and become the plan holder.
  • Canada disability savings grants (CDSG) and Canada disability savings bonds (CDSB) are amounts that the Government of Canada contributes to the RDSP.  Grants of up to 300% of contributions and bonds of up to $1000 per year are available (grants and bonds vary depending on the beneficiaries family income and are subject to yearly maximums).  Grants and bonds may be paid until the end of the year in which the beneficiary turns 49.  In some circumstances, an individual may have unused carry forward entitlement to grants and bonds from previous years.
  • The lifetime contribution limit is $200000.  The lifetime maximum CDSB is $20000.  The lifetime maximum CDSG is $70000.
  • Payment of grants, bonds and income earned within the RDSP are taxable to the beneficiary upon receipt, but these payments do not count as income for the calculation of income tested government benefits.  Contributions to the plan are not taxable when withdrawn.
  • Under some circumstances, grants and bonds may have to be repaid to the government.  When disability assistance payments begin, any grants or bonds paid into the plan within the most recent 10 years will be repaid back to the federal government.
  • Lifetime disability assistance payments must begin, under most circumstances, by age 60 and are subject to an annual maximum.  Special withdrawal rules may apply for beneficiaries who have a shortened life expectancy.
  • RRSP funds inherited from the beneficiary’s deceased parent or grandparent (if the beneficiary is financially dependent upon the parent or grandparent) may be rolled into the RDSP on a tax-deferred basis, but such rollovers do not qualify for CDSGs and they reduce the amount of contribution room available.

For more information or to learn more about how this investment vehicle can help you and your family reach your goals contact one of our certified LCU Financial associates.

 

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