Patients suffering from a severe and prolonged impairment may qualify for a Government of Canada grant program. The Canada Disability Savings Grant (CDSG) is for eligible disabled person 49 years and under. The purpose of the program is to provide financial support and encouragement to assist with retirement savings for someone suffering with a long term disability.
Registered Disability Savings Plan (RDSP) established in 2008 is a long term savings plan for persons with a disability; much like Registered Retirement Saving Plan (RRSP) is used for others. However, the power of grant money makes it exceptional. Just by depositing a $250 GST cheque each year, starting at age 32, could provide over $29,000 in RDSP, by the age of 60.
Unfortunately, 80% of BC beneficiaries, who qualify, have not opened one. One such recent enhancement announced by Jim Flaherty to make the plan more accessible and useful, has been to allow a person who loses his disability credit to keep the plan.
The government matches contributions up to 300%, depending on the family income. The maximum grant available is $3500 each year, up to a lifetime limit of $70,000, and payable up to the age of 49. For example, if a family’s income is less than $85,414 the first $500 contributed each year will receive $3 for every $1, that’s $1500 of grant money. The next $1000 of contribution will receive $2 for every $1, up to $2000 per year. Maximum received of $3500 grant money for the $1500 contribution. Family income over $85,414 will receive $1 for $1 up to $1000 a year. In addition, to receiving free grant money and bonds, the plan has the ability for earnings to accumulate tax-free. The holder of a plan is usually the beneficiary themselves, a legal parent or legal representative. To be eligible for the CDSG one must be 49 years or under, qualify for the Disability Tax Credit, a Canadian resident, have a Social Insurance Number, and make contributions to the RDSP. To encourage savings, contributions, bonds and grants the money must remain in the plan for at least 10 years. Any person or organization can contribute to the RDSP on behalf of the Beneficiary, with written permission from the plan holder.
The government has also recently expanded the opportunity to allow rollover provision where proceeds from a deceased parent’s or grandparent’s RRSP, RRIF or Registered pension plan to a RDSP of a financially dependent child or grandchild with a disability.
Setting up and establishing the plan must be done with one of the participating financial organizations. Not all institutions are offering the RDSP plan. This may be due to the cost of administration and the ongoing expense with the plan. The CRA website lists the participating banks, credit unions, and investment companies.
One significant factor to note is money paid out of the RDSP does not affect the federal benefits such as Canada child tax credit, GST credit, Old Age Security and Employment insurance and social assistance payments.
RDSP offer a great advantage for people with disabilities to protect their savings and enhance their financial income benefits.
Published in the BCNA Bulletin Fall 2012
E&OE/2013 SBILLAN Wealth solutions doing business as SB Wealth Solutions firstname.lastname@example.org; www.sbwealthsolutions.ca