None of us know what the future holds. The wisdom of families who have gone before is the mantra that "good planning sews the seeds of peace of mind".
If you live in BC, you can easily plan ahead for future holders of RDSPs with a Representation Agreement.
Click here for the full post: http://rdspresource.ca/index.php/2011/11/account-holders-and-representation-agreements/
The RDSP Resource Centre has a website and help desk to assist people in understanding, qualifying for, and setting up their RDSPs. You’ll find news, detailed information, tips and discussion.
If your question isn’t answered on the website, call or email.
Telephone: 604-630-0333 or toll free 1-855-773-RDSP (7377)
The payment of Canada Disability Savings Bonds and Grants – the federal government contributions – are sometimes delayed in being deposited into people’s RDSPs. Usually the problem is not serious, however, it also usually won’t be rectified if you don’t do anything about it.
I recently did a detailed post on why government payments are delayed and what you can do about it. You can read it here: http://rdspresource.ca/index.php/2011/09/delays-in-the-payment-of-grant-or-bond/
DISABILITY TAX CREDIT
The Disability Tax Credit (DTC) is a federal non-refundable tax
credit specifically for people with disabilities and serious medical
conditions. It can be claimed by the qualifying person, or a family
member, to reduce the amount of taxes he/she has to pay. This means you get to keep more of the money you earn.
You also need the DTC to open a Registered Disability Savings Plan
and qualify for up to $90,000 in federal government contributions. In
addition to the DTC, there are many other valuable benefits and tax
credits available to people with disabilities, mental or physical
impairments, or those whom have serious medical conditions. Many
Canadians are unaware of the tax benefits that they are entitled to or
are unable to navigate through complicated applications and filings.
People of any age may qualify for the DTC. People with a visual
impairments or who are on life-sustaining therapies qualify. Otherwise,
people must have a mental or physical condition (including a medical
condition) that affects one or more of the basic activities of daily
living listed here:
Speaking Dressing Elimination (bowel or bladder functions)
Hearing Feeding Walking
Performing the mental functions necessary for everyday life
In addition, the condition must have lasted or be expected to last for at least 12 months.
Examples of disabilities and conditions that may qualify for the DTC
are listed below. Please remember that people with many other
disabilities and conditions may also be eligible.
Bipolar Disorder Diabetic Fibromyalgia
Brain Damage/Injury Arthritis Learning Disability
Depression/Anxiety Down Syndrome/Autism Multiple Sclerosis
Benefits of the Disability Tax Credit
Some of the benefits of qualifying for the DTC include:
Reduce your tax payable – The DTC was established to reduce the amount of tax you must pay to compensate for some of the additional expenses people with disabilities face.
Transfer credits to eligible family members – If you do not pay taxes
(e.g. you have no employment income), the DTC may be transferred to an eligible family member (e.g. a parent or a spouse) who does pay taxes.
Make Retroactive Claims – Once you have been approved for the DTC, retroactive claims may be submitted for the past ten years to offset previously paid taxes.
Make Future Claims – Once approved, you will be able to claim the DTC in the future to reduce your future taxes.
Claim Additional Credits/Enhancements – Once approved, you are eligible for additional credits
Become eligible to open an RDSP – You must be eligible for the DTC to be able to open a Registered Disability Savings Plan. The RDSP is a powerful savings tool. The federal government will contribute as much as $90,000 to your RDSP.
The Registered Disability Savings Plan (RDSP) was introduced by the
government of Canada to help families and people with disabilities save
for their long-term financial security.
The benefits of saving in an RDSP:
Contributions to an RDSP are not tax-deductible, but they grow within
the plan on a tax-deferred basis. In addition, contributions may be
eligible for the Canada Disability Savings Grant (the grant) and the
plan may be eligible for the Canada Disability Savings Bond (the bond).
The grant provides matching contributions; no contributions are required
for lower income individuals/families to receive the bond. Together,
they could add up to $90,000 to your RDSP.
There is a lifetime contribution limit of $200,000 per beneficiary and no annual contribution limit.
Note that withdrawals trigger the repayment of any grant or bond received during the previous 10 years.
Making the most of your RDSP:
Here are some age-related strategies that may help you maximize the value of your plan, depending on your circumstances.
When the beneficiary is a young child:
- Make contributions that attract the grant as early as possible, to
maximize tax-deferred growth and to minimize the effect of the grant
“clawback” — if a withdrawal is made, any grant payments received in the previous 10 years must be paid back.
- Try to make an annual contribution large enough to attract the
maximum matching grant contributions. The earlier you start, the better chance you will have of reaching the maximum grant amount of $70,000.
- The tax-deferred status of contributions makes the RDSP an ideal
way to invest in long-term solutions like a growth oriented mutual fund.
When the beneficiary is a young adult:
- Try to contribute every year because the grant and bond cannot be
received following the year the beneficiary turns age 49. Even if there is no intention to contribute, the bond can be maximized simply by opening the plan early enough.
- Upon reaching the age of majority, a beneficiary who is capable of
managing his or her own finances can become the holder of his or her
own plan. This isn’t compulsory, however. If you are the parent and have been the holder while the beneficiary was a minor, you can continue as holder.
- At this stage, an investment solution that strikes the right balance
between growth and safety may make sense depending on when withdrawals are planned.
When the beneficiary is a mature adult (40+):
- Contributions to an RDSP do not qualify for grant contributions
following the year the beneficiary turns 49. In addition, plans are not
eligible for the bond after this time. But beneficiaries can still
benefit from tax-deferred growth by contributing up until the year they turn age 59.
- Lifetime Disability Assistance Payments (LDAPs ***See explanation below) can begin at any age but must begin by the end of the year in which the
beneficiary turns age 60. Consider waiting at least 10 years after the
final grant and bond have been received into the plan before requesting LDAPs; otherwise, the grant and bond payments received in the previous 10 years will have to be returned to the government.
- The portion of the LDAP consisting of grant, bond and investment
income is taxable at the beneficiary’s marginal rate, which may
influence the decision to begin payments. For example, if the
beneficiary’s marginal tax rate is likely to decrease at retirement age,
it may be advantageous to delay LDAPs until that time.
- More conservative investment options, including those that generate
regular tax-efficient income while providing some growth to offset
inflation, should be considered as payments from the RDSP must begin.
Go to the Vancouver Foundation’s website on Endowment 150 an initiative that helps people to get started on saving through a RDSP by offering a one-time $150 gifts to a Registered Disability Savings Plans (RDSP). Check it out…
My 26 year old son has opened up an RDSP with BMO.
We were told that BMO’s Legal Dept. does not recognize
Representation Agreements. From PLAN I understand that
this is not uncommon. We were able to set it up by going
into the branch for every step. We found the BMO branch
at Brentwood Mall in Burnaby to be very helpful.
PLAN has created a new site – www.rdsp.com. It’s the go-to site for information about Canada’s new registered disability savings plan and the accompanying Canada Disability Savings Grant and Bond.