Thanks to the RDSP, you will save money and benefit from grants that will enable you to enhance financial security for yourself or your loved ones with severe disabilities.
The RDSP is for any person who wants to contribute to the RDSP of an eligible beneficiary.
To set up an RDSP, the beneficiary must:
• Be eligible for the Disability Tax Credit according to Canada Revenue Agency criteria
• Have a valid Social Insurance Number (SIN)
• Be under the age of 60
• Reside in Canada
Age and residence criteria are not taken into consideration when transferring an RDSP account opened at another financial institution.
The beneficiary, his or her parents, or if the beneficiary is incapacitated, his or her legal representative can establish an RDSP. RDSPs can also be held jointly by beneficiaries and their parents. A public department, agency, or institution that is legally authorized to act on behalf of the beneficiary can be a holder of the account.
The plan only authorizes a single beneficiary, and this beneficiary can only enter into one plan.
Your contribution is matched by the Canada Disability Savings Grant (CDSG) – up to $3,500 annually and $70,000 over the beneficiary’s lifetime, depending on the beneficiary’s net family income and the amounts contributed to the RDSP.
• Low-income and modest-income families could have access to the Canada Disability Savings Bond (CDSB) without even having to contribute. They need only open an RDSP – up to $1,000 annually and $20,000 over the beneficiary’s lifetime.
• CDSB and CDSG payments depend on the beneficiary’s net family income.
• Investment income grows tax-free as long as it stays in the plans.
• No annual contribution limit; maximum lifetime contribution per beneficiary of $200,000.
Effective January 2011, you can claim your unused grant and bond entitlements from the last 10 years (from 2008 onwards). This measure applies if you already hold an RDSP or if you opened an RDSP in January 2011 or after.
A new measure was adopted on July 1, 2011, with respect to RRSPs, allowing for greater flexibility for the transfer of a deceased individual’s RRSP to the RDSP of a financially dependent child or grandchild, for all deaths occurring after March 3, 2010. These rules also apply to products transferred from a RRIF to a RDSP, as well as to certain lump-sum amounts paid by registered pension plans (RPP).
Who Can Contribute To An RDSP?
Beneficiaries themselves, their parents, their loved ones, or any other person who has been authorized in writing by the holder of the plan, can contribute to the RDSP. In order to benefit from the Canada Disability Savings Grant (CDSG) or the Canada Disability Savings Bond (CDSB), contributions must be made before the end of the year of the beneficiary’s 49th birthday.
How Do I Withdraw From The RDSP?
Withdrawals from an RDSP may be made in the form of Lifetime Disability Assistance Payments (LDAP) or Disability Assistance Payments (DAP):
Lifetime Disability Assistance Payments (LDAP) are regular payments that must be made at least once per year until the end of the plan or the death of the beneficiary. These payments must start no later than the beneficiary’s 60th birthday, but they can also start earlier. The payment is calculated based on the life expectancy of the beneficiary and the fair market value of the plan.
A Disability Assistance Payment (DAP) is an amount paid to the beneficiary upon request from the beneficiary or the holder of the plan.
Important: If funds are withdrawn from the RDSP before the 10-year waiting period is up, the total of Grants and Bonds received over the 10 years preceding the withdrawal will have to be reimbursed to the government.
Income from the RDSP does not reduce the beneficiary’s eligibility for federal income-tested benefits, such as:
• GST or HST credits
• The Canada Child Tax Benefit (CCTB)
• The Old Age Security Pension (OASP) and the Guaranteed Income Supplement (GIS)
• Employment Insurance benefits