REGISTERED DISABILITY SAVINGS PLAN
In October 2007 the federal government released draft legislation for the Registered Disability Savings Plan (RDSP) The draft legislation recommended a $200,000 lifetime maximum contribution to an RDSP with no annual limit. The plan received royal ascent on December 14 2007. The regulations were completed on June 2008 with an implantation date of December 1 2008. However it was not until December 22nd 2008 that a Canadian financial institution was prepared to offer an RDSP for the year ending Dec.31. On December 29th 2008 the government announced that the year end deadline for 2008 applications would be extended to March 2, 2009, 60 days beyond the year end. It is anticipated that this 60 day extension will be included in the regulations. It is probable that more RDSP plans will be offered during the early part of 2009.
Under the plan individuals who qualify for the Disability Tax Credit, their parents or legal guardians can
establish
an RDSP and become eligible to receive a Disability Saving Grant, and for low income families a Disability Savings bond. People need to be aware of the definition of family income. If the person with the disability is under age 18, the net family income is defined as the parent’s net income. As soon as the person reaches age 18, the person with the disability’s own net family income is used.
If the person and/or their family have a net income of less than $74,000 a year they are eligible for the maximum federal matching grants, of 300% on the first $500 of annual contributions and 200% on the next $1,000 of annual contributions. For families whose net income is less that $74,000, who deposits $1,500, are eligible to receive a $3,500 disability savings grant for a total annual deposit of $5,000. The Disability Savings grant is available for 20 years or age 49 of the beneficiary of the plan, whichever comes first, for a lifetime limit of $70,000. Families with a net family income of less than $20,863 will be eligible for a Disability Savings bond. The federal government will contribute $1,000 a year into a Registered Disability Savings Plan with no contributions from the individual or their family for a lifetime limit of $20,000.
The RDSP must be converted into a Disability Assistance Plan (DAP) income at age 59. The DAP income is calculated on stats Canada’s life expectancy table, plus 3 divided into the total value of the fund. There must be sufficient funds remaining in the plan to refund the total grants and/or bonds contributed to the plan on death or maturity. The growth in the plan is tax-deferred. Only the investment earnings are treated as income when the money is paid out as a DAP. Anyone can contribute to the plan, a parent, friends, relatives or a community. Most provinces in Canada have exempted the assets in an RDSP and the DAP from their social income benefits for people with a disability.
For more information contact LifeTRUST Planning at
lifetrust@rogers.com
or call 1 800 638-7256
