(Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net)
Awhile ago, I received a question from one of my email subscribers. This was an email from a mother where her son with disability has shortened life expectancy.
“Dear Samuel, thank you for your ongoing email updates. They are very informative and I enjoy reading them. I have a question, my son has a RDSP account, but according to his current situation, I’m afraid he may not live past 10 years. I remember you talked about there is a 10 years claw back rule for the grants and bonds. I wonder what options do I have now?”
Here was my response:
“Thank you for your question, XXX [name is hidden to protect her privacy]. I’m so sorry to hear about your situation. An RDSP could be setup for a beneficiary with grants and bonds being paid over time. [Beneficiary is the person who approved with the disability tax credit] . If the beneficiary meets the requirements for a shortened life expectancy at some point in the future and they apply to the government, their RDSP will be converted to a Specified Disability Savings Plan (SDSP). At this point, no further contributions can be made (except proceeds from an RRSP or RRIF from a deceased parent or grandparent) and no grant and bond will be paid. The 10 year repayment rule that would otherwise apply to grants and bonds with respect to withdrawals would be waived. Therefore, the beneficiary could draw out the capital, bonds and grant over a 5 year payment without having the grant and bond repaid. The link below has more specific details regarding shortened life and RDSPs. http://www.cra-arc.gc.ca/gncy/bdgt/2011/qa11-eng.html.
Hope this would be helpful to your family”
- Information may be subjected to change without notice and cannot be guaranteed to be error-free. It is used for general understanding only and do not intend to provide any advice. Please consult the benefit program provider and a professional for exact details.