One of the key benefits of having the Registered Disability Savings Plan (RDSP) is the ability to attract the Canada Disability Savings Grants (CDSGs). This is a matching grant from the government to enhance the savings for the disabled person. For example, for a beneficiary where their family net income falls below the first income threshold of the RDSP matching rate, if one were to contribute $1500, government could provide up to $3500 of matching grants. This has not even considered there could be matching grants carried forward from the early years. (Click here for the matching rate in 2016: http://samuelconsultant.com/rdsp-2016-updates/)
Although the matching grant is fascinating, some of my clients with lower-income express that they are living with a tight monthly budget. They would love to make the contribution to their RDSP account, but where could they find the money to do so? Below are some ideas:
For Beneficiary Under The Age Of 18
Canada Child Benefit
The Government of Canada just introduced the new “Canada Child Benefit” in 2016. This is a monthly benefit paid to family who has child age under 18. The amount would vary according to the family income, the number of child in the family, and the age of the child. For families with lower-income, they could be entitled to more benefit than before.
Below are more details about “Canada Child Benefit”
Child Disability Benefit
Similarly to the Canada Child Benefit, this is also a monthly benefits that is subjected to family income. However, the child must be approved with the Disability Tax Credit in order to be entitled to this.
Below are more details about “Child Disability Benefit”
For Beneficiary Age 18 Or Over
Ontario Disability Support Program
Although the above child benefits will no longer be available when the disabled person turns into an adult, there is the Ontario Disability Support Program. This program is divided into income support and employment support. The ODSP Income Support provides financial assistance to disabled Canadians to pay for living expenses such as housing and foods. This program does NOT kick in automatically, so one would have to go through the application progress when reached the age of majority.
Here are more details about the ODSP:
Others Money Sources to Contribute Into RDSP:
If there are existing savings, (i.e.: bank savings, TFSA, RRSP, non-registered investments), one could consider transferring the funding into the RDSP. There could be taxation and other impact upon the transfer, so make sure you understand them before you proceed.
Contribution From Other Family Member
There’s no rule that restrict who could contribute into the RDSP account for the disabled person, as long as the RDSP account holder provides consent to do so. Since there is an annual maximum amount of Canada Disability Savings Grant one could receive, it is important to discuss among one another how much contribution should be put in every year.
Lastly, I would like to remind that once the money is deposited into the RDSP account, be prepared this will be used for the disabled person in the long run, and not meant to be withdrawal in the short term as there is claw back rules on the government benefits for early withdrawal.
- Disclaimer: The above details are only for illustration purposes, and not intend to provide specific financial advice. The amount of government grants and bonds one could receive depends on many factors such as the eligibility of the disability tax credit, family net income, age, therefore, they could be differed for each individual’s case. They could be subjected to change, and they are not guaranteed to be error-free. Market conditions, tax laws, and investment factors are subject to change. Individual should always consult with a financial professional before making any decision.