Anyone with a Disability Should Take Advantage of an RDSP

14 March 2019 by National Bank

Are you or a loved one living with a disability? Registered disability savings plans exist to help people with severe and prolonged impairment in physical or mental functions achieve long-term financial security. Learn about the RDSP’s advantages and how you can maximise your savings.

1. What is an RDSP?

An RDSP is a savings plan from which a person with a disability can withdraw money whenever they need. For example, the amount accumulated in an RDSP can be used to pay for healthcare services or home care assistance. Be careful though, as there are rules that affect withdrawals from RDSPs.

2. What are the advantages?

Different kinds of savings and investments can be used to contribute to an RDSP, like deposits, shares, bonds or mutual funds.

However, focusing on government bonds and grants is what will allow you to build a financial cushion in the long-term. These government bonds and grants can reach tens of thousands of dollars.

3. What are these government grants?

RDSPs qualify for two government grants: the Canada disability savings grant (CDSG) and the Canada disability savings bond (CDSB).

CDSGs can reach $3,500 per year (or up to $70,000 over a lifetime), depending on the contributions and the beneficiary’s family income. You can also receive a grant of up to $10,500 in one year by carrying forward unclaimed credit from previous years.

As for CDSBs, they are available only for low- to modest-income citizens. There is no minimum contribution required; simply opening an RDSP makes you eligible for CDSBs. The bond’s amount depends on the beneficiary’s family income.

A CDSB can reach $1,000 per year (or up to $20,000 over a lifetime). With CDSBs, you can also receive a grant of up to $11,000 in one year by carrying forward unclaimed credit from previous years.

4. Who is eligible?

Registered disability savings plans are available only to citizens who are eligible for the disability tax credit (DTC). This is important when opening the RDSP, but your eligibility will also be verified every year.

To be eligible for an RDSP, you also need to have a valid social insurance number, be a resident in Canada when the plan is started, and be under the age of 60. The RDSP’s beneficiary must be the person for whom money is being saved.

5. Who can contribute?

The plan’s holder (or anyone who’s received written permission from the holder) or the person or entity who opens the RDSP and makes contributions on behalf of the beneficiary can contribute. Please note that with the holder’s written permission, anyone can make a contribution on behalf of the beneficiary.

There are three ways to become a holder:

  • If the beneficiary is over the age of majority and contractually competent, they will become the holder.
  • The holder is a person or entity who is legally authorised to act on behalf of the beneficiary if they are over the age of majority but their contractual competency to enter into a plan is in doubt.
  • If the beneficiary is a minor, then only their father or mother, or any other person or entity legally authorised to act on behalf of the beneficiary, may be the holder. When the child reaches the age of majority, the parent or guardian can remain co-holder with the beneficiary once they become an adult.

6. How do you open an RDSP?

To sign up for an RDSP, a person who’s eligible to be a holder must go to a financial institution that offers this savings plan. National Bank is recognised as an institution that offers RDSPs, and has all the tools and resources you need to help guide you.

The lifetime limit for contributions to an RDSP is $200,000. There is no annual contribution limit. The deadline for contributing to an RDSP is December 31 of the year in which the beneficiary turns 59 years old. Money from an RDSP can be withdrawn and used by the beneficiary, or withdrawn by the holder and used for the beneficiary.  

The earlier you start contributing, the more you’ll benefit from this plan’s advantages, including the bonds and grants. To learn more, or to open an RDSP, contact your financial advisor. 

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