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The budget proposes several measures related to registered disability savings plans (RDSPs), including:

Plan holders

Certain family members (spouse, common-law spouse, common-law partner, or parent of the disabled individual) may, on a temporary basis, become plan holders of a registered disability savings plans (RDSPs) for an adult individual who might not be able to enter into a contract. Currently, a plan holder must be either the beneficiary or their guardian or legal representative. This measure applies from the date of Royal Assent of the enacting legislation until the end of 2016.

Proportional repayment rule

Under current rules, Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) paid into an RDSP in the preceding 10 years must be repaid to the government under certain conditions (the “10-year repayment rule”), including when an amount is withdrawn from an RDSP. The budget proposes to introduce a proportional repayment rule that will apply when a withdrawal is made from an RDSP. Generally, for each $1 withdrawn from an RDSP, $3 of any CDSGs or CDSBs paid into the plan in the 10 years preceding the withdrawal must be repaid.

Maximum and minimum withdrawals

The budget proposes changes to the maximum and minimum withdrawals from RDSPs. These changes will apply after 2013.

Rollover of RESP investment income

The budget proposes to allow investment income earned in a Registered Education Savings Plan (RESP) to be transferred on a tax-free (or “rollover”) basis to an RDSP if the plans share a common beneficiary, if certain conditions are met. This measure will apply to rollovers of RESP investment income made after 2013.

Termination of RDSP following cessation of eligibility for the disability tax credit

The budget proposes to extend the period for which an RDSP may remain open when a beneficiary becomes disability tax credit-ineligible, i.e., the beneficiary’s condition improves so that he or she becomes ineligible for the disability tax credit (DTC).

To have this measure apply, the plan holder is required to make an election in prescribed form on or before December 31st of the year following the first full calendar year for which the beneficiary is DTC-ineligible. The election will generally be valid until the end of the fourth calendar year following the first full calendar year for which a beneficiary is DTC-ineligible. This measure will apply to elections made after 2013.

Administrative changes

The budget replaces certain deadlines regarding the administration of an RDSP with a requirement that an RDSP issuer act “without delay” in notifying Human Resources and Skills Development Canada when an RDSP is established or transferred from one RDSP issuer to another.

This information is courtesy of KPMG Canada: Canadian Web site is located at www.kpmg.ca