A recap of the budget where some key RDSP rules changed. The main one, was that RDSP’s did not need to be liquidated if the recipient’s DTC expired. Before it was unclear whether an RDSP could be seized as part of a bankruptcy, luckily the Feds fixed that too.
Budget 2019 is finally out, and it has a whole treasure trove of goodies. It is truly an election-year budget with promises of the future (if you reelect the current government).
I will allow much smarter folks to comment on other areas, but for Registered Disability Savings Plan there are two nice mentions.
RDSP Exempt from Seizure in Bankruptcies
Doug Hoyes and I talked about this on his podcast, but now it looks to be officially in grained in the system.
“Unlike RRSPs, amounts held in RDSPs are not exempt from seizure by creditors in bankruptcy. To level the playing field, Budget 2019 also proposes to exempt RDSPs from seizure in bankruptcy, with the exception of contributions made in the 12 months before the filing.”
Budget 2019 Canada
I assume the bankruptcy laws may be changed one day, but this seems quite clear. The past 12 months of payments being not exempt makes sense as well.
RDSP Pay Back if DTC Lost
This has always been a big problem, and with the CRA cancelling DTCs left and right this is a good thing.
“To address concerns that this treatment does not appropriately recognize the financial impact that periods of severe, but episodic, disability can have on individuals, Budget 2019 proposes to eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC. Doing so will allow grants and bonds otherwise required to be repaid to the Government to remain in the RDSP. To ensure fairness for DTC-eligible beneficiaries, some restrictions on access to these amounts will apply. The estimated cost of this measure is $109 million over five years, beginning in 2019-20, and $33 million per year ongoing. “
Budget 2019
Previously, you had a short period of time where you had to pay back all grants and bonds; now, you can leave the money there. I assume if you try to take money out, you would have to pay back grants and bonds (and pay tax on any growth). There are still a few fine points to clarify here.
RDSP Not Forgotten
I am glad to see the RDSP is not forgotten in the budget. I am curious to see what the loyal opposition has to say about these areas come election time.
Epilogue
Yes, this is now law with the passing of the budget in 2019.
Index of RDSP Pages
Here is the RDSP Page List in case you got here and are wondering where to find out more information.
- The Registered Disability (RDSP) page, where you most likely came from. Check here for all things to do with RDSP and applying for it.
- How to Laying the Groundwork for an RDSP outlines the most difficult part of the process: applying for a Disability Tax Credit (DTC).
- How to Open an RDSP account sounds simple, but it is fraught with landmines and hidden silliness. Open the most flexible investing account possible.
- Disability Tax Related Topics covers a wide scope of tax-related ideas and concepts once your loved one has a Disability Tax Credit.
- Autism Specific Articles is a page dedicated to what I have learned about Autism, money and life.
DTC & RDSP FAQ
The account will no longer receive grants or bonds until the DTC is renewed.
It can take six to eight weeks, depending on how busy HSDRC and the CRA are. If you do not hear back after eight weeks, follow up with a phone call.
Nothing; your bank is creating its own weird policies about your RDSP. You’ll have to wait until your bank allows you to make deposits again.
No, as of 2019 it is specifically excluded from all bankruptcy actions.
Just want to make sure I understand the changes to the RDSP. I am 49 and will lose my DTC eligibility when I turn 50 in 2022. If I do not make any withdrawals until I am 60, then I will not lose the grants and bonds that were deposited in the account in the prior years? Prior to this change I believe I would have had to pay this back. Thank you for your article.
Yes that is my understanding as well. I outlined things more in RDSP after DTC Lost, and that is my understanding.
Specifically
I like these important changes but not enough to justify voting for this gov’t come election time (don’t want to turn this into a political discussion, but just sayin…)
I am hoping that the act of “passing the budget” means these come into effect at that point. I am not always clear on parliamentary procedures and such but my fingers are crossed.
These changes are good ones, but there are more important issues with the RDSP that need to be resolved. I don’t know if the Conservatives would even support the change letting people hold onto their RDSP accounts and the government contributions if they lose the DTC, though.
This goes back to my question that if this is stated in the budget, and the budget is passed, is this not law? My parliamentary procedures understanding is quite limited.
I am not sure either so I tried to look it up. Could not find much info except that the budget runs from April 1 to Mar 31, so presumably this would take effect next month.
OK, we can go with that, if anyone else has any input on this, jump in! I have asked other folks about this, but haven’t had a reliable answer yet.
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