Registered Disability Savings Plan (RDSP)
What is Registered Disability Savings Plan (RDSP)?
To address the financial challenges that families with special needs may be facing, the Government of Canada introduced the Registered Disability Savings Plan (RDSP) back in 2008. The main purpose is to assist Canadians with disability to enhance their savings in the long run. Similar to other registered plans (i.e.: RRSP, TFSA, RESP), money within the RDSP may grow on a tax deferred basis until withdrawal. The Canada Disability Savings Grants provides great incentive for families to start savings for the disabled person, while the Canada Disability Savings Bonds is a wonderful subsidy for those who earns low-income.
What is the Canada Disability Savings Grants (CDSGs)?
To encourage families to start savings for the disabled person, the Government of Canada provides the Canada Disability Savings Grants (CDSGs). This is a matching grant that the government will deposit into the RDSP account. The amount of CDSGs will be based on how much is the contribution and the net family income of the disabled person. The lifetime benefit per beneficiary is up to $70,000. Grants will be payable until the end of the year in which the beneficiary reaches age 49.
What is the Canada Disability Savings Bonds (CDSBs)?
To provide even greater support to low income families, there is the Canada Disability Savings Bonds. It is available to low-income families, with benefits up to $1000/year. The lifetime benefit per beneficiary is up to $20,000. Unlike the matching grants, CDSB does not require any contribution, government will solely look at the net family income to determine whether one is eligible for it. This savings bonds will be payable until the end of the year in which the beneficiary reaches age 49.
Who is eligible to open a RDSP account?
To setup a RDSP account, you must:
– Be a Canadian resident
– Have a valid SIN
– Be less than 60 years of age (Note: Grants and bonds will only be payable until the end of the year in which the beneficiary reaches age 49.)
– Already approved with the Disability Tax Credit
How could I use the funding within the RDSP?
The withdrawals do not have to be disability related expense, in fact, government does not impose any restriction on how you use the savings.
Generally speaking, there are two kind of payments from the RDSP. They are the
- Lifetime Disability Assistance Payments (LDAPs): Recurring annual payments that continue until the beneficiary passes away
- Disability Assistance Payments (DAPs): Lump sum payment that can be paid to the beneficiary after the RDSP account is set up
There are specific rules to regulate what is the amount you could withdraw and when the withdrawal could begin. When withdraw happens too early, there will be claw back of the government grants and bonds.
To have a deeper understanding of the RDSP rules, please click here to download our “Guide On Disability Savings Benefits”.
How could I setup a RDSP account?
There are many financial institutions such as banks and investment brokerages that could administer the plan nowadays. However, it is not just about where to open the accounts, but whether you may receive the advice and the help that you need in the long run. The Registered Disability Savings Plan (RDSP) contains many rules which involves very complex planning. We specialized in the RDSP planning, assisting disabled Canadians to setup their accounts, apply for government savings benefits, providing investment advice and ongoing management of their RDSP.
To setup or transfer over your RDSP account, please click here to contact us.