Is the Registered Disability Savings Plan (RDSP) only for the wealthy families?
In my previous posting, we have discussed over the Canada Disability Savings Grants (CDSGs). Although it is one of the most generous matching grant from the government of Canada, it often leads to the question: “If a family is earning low-income, and unable to make any contribution, will they be able to benefited from having a RDSP?”
Fortunately, beside the disability savings grant, there’s another feature within the RDSP, and that is the Canada Disability Savings Bonds (CDSBs). The Government of Canada will deposit bonds of up to $1,000 a year to low-income Canadians with disabilities. No contributions is even required. The lifetime bond limit is $20,000. RDSP can receive this bond until the year in which the beneficiary turns 49.
According to the CRA:
“The amount of the bond is based on the beneficiary’s family income. The beneficiary family income thresholds are indexed each year to inflation. For 2012, if the family income is:
- $24,863 or less (or if the holder is a public institution), the bond is $1,000;
- between $24,863 and $42,707, part of the $1,000 is based on the formula in the Canada Disability Savings Act;
- more than $42,707, no bond is paid.”
* Note that for minor beneficiary, the family net income is that of his or her parents, while beneficiary over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable.
(Update: The chart for year 2016 can be found at: http://samuelconsultant.com/rdsp-2016-updates/)
Furthermore, another very attractive rule is that unclaimed CDSBs may be carried forward. One may claim back up the amount up to 2008 or the year the beneficiary is eligible for the disability tax credit, whichever comes the later. The maximum carry forward period can last for 10 years.
Not too long ago, I assisted a family in obtaining $5,000 of CDSBs even without any contribution. I wrote a blog in regards to this. If you are interested in reading, please click here. (Updates: As of March 8th, 2016, this client received $8000 of CDSBs)
The above details are for general understanding only, not intend to provide any financial advice. The details may be subjected to change without notice. Although we tried to post the details as accurate as we could, they are not guaranteed to be error-free, and may not be applicable to your specific situation. Please always consult a financial professional before making any decisions.