Registered Disability Savings Plan

I wrote this in 2009 after the RDSP (Registered Disability Savings Plan) program started. It was before any bank had announced what they were doing about it. The program continues to evolve in terms of rules and regulations. Not all banks or financial institutions offer the program.

This new savings vehicle introduced by the Government has taken a while to appear as a Product in the banks. I checked with TD for a time, but they have finally come out with their version of the RDSP (in 2009) ( Registered Disability Savings Plan ).

This delay is frustrating, given the speed shown to get the TFSA vehicles in place for TD. BMO had an RDSP vehicle available for a while. It almost caused me to move my banking services, and it may still. It was a BMO Mutual Funds product, so it was less attractive.

Who is Eligible for the Registered Disability Savings Plan?

The Government’s explanation is simple enough:

• is eligible for the disability amount;
• has a valid social insurance number (SIN);
• Is a resident of Canada
• They are under the age of 60. This age limit is not applicable when a beneficiary’s RDSP is opened due to a transfer from the beneficiary’s prior RDSP.

The first point is the most significant. The RDSP recipient must have a DTC from the CRA. That means you must have filled in a T2201 Disability Tax Credit Certificate and had it approved by the Government. Once that is in place, you can start looking at the RDSP.

What is an RDSP?

That’s a good question. I think reading the government’s information on the program is worthwhile. A quick synopsis from their website is a good starter:

A registered disability savings plan (RDSP) is a savings vehicle designed to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit (disability amount).

Contributions to an RDSP are not tax-deductible. The RDSP is different from the RRSP in this way. Contributions are after-tax money. Contributions can be made until the end of the year in when the beneficiary turns 59 years of age. Money deposited and withdrawn is not included as income for the beneficiary when paid out of an RDSP. However, the Canada disability savings grant, Canada disability savings bond and investment income earned in the plan will be included in the beneficiary’s income for tax purposes when paid out of the RDSP.

So a valuable vehicle for parents with disabled kids worrying about how their kids will thrive or survive financially in the future.

Benefits of the Program

There is no limit to the amount of money put into an RDSP in a particular year. However, there is a $200,000 lifetime limit per person.

The benefit of putting money in this type of savings vehicle is that the Government will pay matching grants of 300, 200 or 100 percent of the value-added, depending on the family’s income level. Thus, someone whose net income is less than $34000 would get $3 more for every $1 put into the program because someone with net income over $77000 now will get $1 more for every $1 put into an RDSP.

For folks with disabled loved ones, this is another way to help out financially, and I am glad to see that TD is finally getting on board with the program.

Related RDSP Pages

• The RDSP Page is the Overview of all articles I have written about the RDSP (including DTC and other areas).
  • RDSP : Laying the Ground Work (first things first)
    What needs to be done BEFORE you can apply for a Registered Disability Savings Plan? A major aspect of this is the Disability Tax Credit (DTC). Make sure you click on this page to get started.
  • RDSP : Working with The Account
    Now that you have succeeded in getting your Disability Tax Credit (DTC) you need to open an RDSP account with a bank, but how is that done? It is not as easy as you might think. This page outlines many issues that have arisen for my family working with an RDSP account.
  • Disability Tax Credit Related Topics
    Thanks to my RDSP and DTC work I then had to learn a great deal about the tax implications of having a disabled child.
  • Autism Specific Articles
    Being the proud Father of a child on the Autism Spectrum, I also ended up writing a great deal about Autism specific things as well.

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