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What is a Registered Disability Savings Plan (RDSP)? It’s a long-term savings plan, created by the Canadian Government in 2008, designed to help Canadians with disabilities and their families save for the future. Canada is the first country in the world to initiate a program that helps people with disabilities to save for their future. The Canadian government will pay a matching Canada Disability Savings grant of up to $3,500 a year based on contributions. The government will also pay a Canada Disability Savings bond of up to $1,000 a year into an RDSP for low and modest income Canadians. No contributions are necessary to receive a Canada Disability savings bond.

To qualify as the beneficiary of an RDSP, a person with a disability must be under age 60, a Canadian resident with a social insurance number and be eligible for the Disability Tax Credit.  To qualify for the Disability Tax Credit, an individual must have a “severe and prolonged physical or mental disability”. It is a non-refundable tax credit that will reduce the amount of income tax a person with a disability or their related caregiver has to pay. For more information on the disability tax credit, visit www.cra.gc.ca/disability.

What is the Canada Disability grant? It is a matching grant that the government will deposit into an RDSP. The government will provide up to 300% in matching grants depending on the amount deposited and the individual’s net family income up to a maximum grant of $3,500 each year, with a lifetime limit of $70,000. Grants will be paid into an RDSP until the year the beneficiary of the RDSP turns 49 years old.

For example if the beneficiary’s net family income is less than or equal to the amount shown on government website, for the first $500 deposited each year, the government will deposit $3 for every $1 deposited up to $3,500. For the next $1,000 deposit, the government will deposit $2 for every $1 deposited up to $2,000 a year; subject to beneficiary’s net family income.(i) After age 18 the net family income is based on the individual’s net income and not their parents’ net family income.

What is the Canada Disability Savings Bond? It is money the government will deposit into an RDSP of low or modest income Canadians. RDSP beneficiaries who qualify for a bond will receive up to $1,000 a year, with a lifetime limit of $20,000. Bonds will be paid into an RDSP until the year the beneficiary turns 49 years old. No contributions are necessary to receive the bond.

For example, if the beneficiary’s net family income is less than the stated amount, the government will deposit $1,000 each year into the RDSP. If the beneficiary’s net family income is between the minimum amount and an upper range a portion of the bond will be deposited each year and as the income increases the amount of the bond will decrease.(ii)

The proceeds from a deceased’s RRSP, RRIF can be rolled over into the RDSP of a financially dependent child or grandchild with a disability. Grants and bonds must remain in an RDSP for at least 10 years. Money from an RDSP can be withdrawn at any age; however when money is withdrawn all grants and bonds paid into the RDSP during the 10 years before the withdrawal must be repaid subject to  amendments included in the 2012 federal budget. Withdrawals must begin at age 60.The RDSP is a must plan for everyone that qualifies. Don’t miss out on this fantastic plan for people with disabilities. For more information visit www.disabilitysavings.gc.ca or call 1-800-622-6232.

(i) income amounts are found on  the government web site www.cra.gc.ca/disability and amounts are updated each year based on the rate of inflation.

(ii) Note the income amounts can be found on the RDSP website and are updated each year based on the rate of inflation.

John Dowson Ex Director LifeTrust Planning www.life-trust.com  1 800 638-7256