The RDSP is a new investment plan which encourages families and individuals to save for the long-term security of persons with severe and prolonged disabilities. It is available to Canadians who are eligible for the Disability Tax Credit, and can provide a sense of assurance to parents and other contributors that may put a plan in place for a beneficiary with a disability. This message is particularly important for clients who would qualify for a Canada Disability Savings Grant and/or Canada Disability Savings Bond in 2008, since the time is now limited to open an account before year end

The RDSP is a savings account not too much different that the new Tax Free Savings Plan, however it is geared to people with Disabilities who are eligible for the Disability Tax Credit.

 The purpose of this savings is to assist families to build income funds for their dependent children and spouses’ so they can subsidize their incomes in later years.

Currently most persons with Disabilities who cannot work will only ever receive CPP disability payments or Ontario Disability Support. This is clawed back if they earn other income, and they are not allowed to own over a certain level of asset in the bank. With the RDSP, these people can have this “retirement type” savings and it will not affect any other programs, payments or pensions. Your contributions are NOT tax deductable, but the Government will match your contributions from 100 to 300%.

There are two elements to the program

1) Disability savings Grant and

2) Disability Savings Bond.

The income thresholds are in the charts below.

Please note, the MAXIMUM amount the Gov’t will match between the two programs is 3500.00 PER YEAR.

So depending on your income, in you put in 1500.00 BEFORE March 1, the Government may match that up to 3500.00. So you will have 5000.00 in the account. The account earns interest, and will compound each year. So your 1500.00 investment can be 5000.00 plus 500.00 interest, ($5500.00) for the year. Then effective March 2, 2009, you are eligible to place ANOTHER 1500.00 in the plan for 2009 year.

So in essence, for your 3000.00 contribution, your child or spouse could have over 11000.00 in the plan after one year!

Lifetime contribution limit for you is 200000.00; the government may match that up to 70000.00 plus 20000.00 Bond.

The only “drawback” is that the Grant and Bond element is only VESTED after 10 years. If you withdraw any funds from this account prior to the 10 years of the Grant or Bond contribution, you would have to pay back that segment to the Government. (However, NOTE the interest you earned on those funds is still yours to keep).

When withdrawals are made, the only taxable amount to your dependant or spouse will be the interest earned and the grant/bond portion. The amount you place in it is not taxable to the recipient ever.

The lifetime contribution limit for an RDSP is $200,000, with no annual limit. Anyone can contribute to the RDSP with the written permission of the plan holder. Contributions are not tax-deductible and are not included in income when paid out of an RDSP. Investment income earned in the plan accumulates tax-free. However, grants, bonds, and investment income earned in the plan are included in the beneficiary’s income for tax purposes when paid out of the RDSP.

Reference: http://www.hrsdc.gc.ca/eng/disability_issues/disability_savings/index.shtml

Canada Disability Savings Grant

A Canada Disability Savings Grant is a supplement that the Government of Canada contributes to a Registered Disability Savings Plan (RDSP). Depending on the beneficiary’s family income and contribution level, the Government may grant up to $3 for every $1 in contributions received by an RDSP in a year, to a maximum of $3,500. The lifetime grant limit is $70,000. A Canada Disability Savings Grant can be paid into an RDSP on a contribution made to the beneficiary’s RDSP by December 31 of the year the beneficiary turns 49 years old.

Beneficiary’s family income	Grant	Maximum
$75,769* or less
on the first $500	$3 for every $1 contributed	$1,500
on the next $1,000	$2 for every $1 contributed	$2,000
More than $75,769*
on the first $1,000	$1 for every $1 contributed	$1,000

*The beneficiary family income thresholds are indexed each year to inflation. The income thresholds shown are for 2008.

Canada Disability Savings Bond

A Canada Disability Savings Bond is paid by the Government of Canada directly into a registered disability savings plan. Depending on the beneficiary’s family income, the Government of Canada may contribute up to $1,000 each year. The lifetime bond limit is $20,000. A Canada Disability Savings Bond can be paid into an RDSP until the year in which the beneficiary turns 49 years old.

Beneficiary’s family income	Bond
$21,287* or less (or if the holder is a public institution)	$1,000
Between $21,287* and $37,885*	Part of the $1,000 based on the formula in the Canada Disability Savings Act
More than $37,885*	No bond is paid

*The beneficiary family income thresholds are indexed each year to inflation. The income thresholds

Until what age can a beneficiary receive a Canada Disability Savings Bond?

A Canada Disability Savings Bond can be paid into an RDSP until the year in which the beneficiary turns 49 years old.

Are contributions to an RDSP required to get a Canada Disability Savings Bond?

No. While an RDSP must be opened and meet all Bond qualification requirements, contributions to an RDSP are not required to receive a Canada Disability Savings Bond.

What are the requirements to qualify for a Canada Disability Savings Bond?

After opening an RDSP, people with disabilities must meet the following conditions to qualify for a Bond:

·         have a Social Insurance Number;

·         be eligible for the Disability Tax Credit;

·         be a Canadian resident; and

·         File income tax returns* and have a family income less than $37, 885 (for 2008). Note: The beneficiary family income thresholds indexed annually to inflation).

* For beneficiaries who are under 18 years of age, parents and/or guardians must file taxes and apply for the Child Tax Benefit.

What is the lifetime limit for Canada Disability Savings Bonds?

The lifetime limit is $20,000 for each beneficiary.

For how many years can a Canada Disability Savings Bond be requested?

There is no limit on how many years a bond can be requested. However, a bond cannot be paid after the year in which the beneficiary turns 49 years old. Once the $20,000 lifetime limit is reached, no more bonds will be paid into the plan.