Many Canadians living with disabilities are not taking advantage of the benefits available to them by having a Registered Disability Savings Plan (RDSP). In fact, only 35% of those who qualify for a RDSP have opened an account since the program’s creation. This has left billions of dollars in government grants and bonds uncollected.
The RDSP is a creditor-proof, registered plan that helps provide long-term security for Canadians with disabilities. Like an RRSP, but specifically designed for those living with disabilities. The non-deductible contribution can be made by anyone on behalf of the beneficiary. RDSPs feature both federal and provincial grants and bonds. Contributions must be made before the beneficiary reaches the age of 60, and while there is no annual limit, the maximum lifetime contribution limit is $200,000.
The Canada Disability Saving Grant (CDSG) is an income tested, contribution matching grant (like a RESP). A beneficiary can receive the CDSG until December 31st of the year in which they turn 49. The maximum lifetime limit for RDSP matching is $70,000. The annual limit is $3500 however, it may be reduced based on family income.
The Canada Disability Savings Bond (CDSB) is also income tested and has a maximum lifetime limit of $20,000. Lower-income families don’t even need to make any contributions to receive the $1000 maximum annual CDSB payment. Higher-income families may qualify for a pro-rated portion, depending on family income.
It is possible to ‘catch-up’ on grant and bond payments – up to 10 years, or to the date of disability diagnosis if an individual was eligible but did not open an RDSP during that time. The maximum grant for a single year per account is $10,500 and maximum bond is $11000.
Withdrawing from RDSPs. When making withdrawals from an RDSP there are no restrictions regarding the purpose for which the money will be used. However, lump sum withdrawals (Disability Assistant Payment) made within 10 years of the last grant or bond being deposited into the account will be subject to a repayment of some government monies. Annual payments (Lifetime Disability Assistance Payment) from the plan must begin by the age of 60. (Similar to a RIFF.)
If you (or someone you know) qualified for the Disability Tax Credit when you filed your tax return this year and you have not opened a RDSP, give me a call to chat about getting one started.
Have a great weekend,
Tracey
Source: RDSP | Mackenzie Investments https://www.mackenzieinvestments.com/en/services/accounts/account-types/rdsp
Photo by Siwawut Phoophinyo on Unsplash
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