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REGISTERED DISABILITY SAVINGS PLANREGISTERED DISABILITY SAVINGS PLANS (RDSPs) WERE INTRODUCED IN DECEMBER

2008 MAKING CANADA THE FIRST COUNTRY IN THE WORLD WITH A REGISTERED LONG

TERM SAVINGS PLAN FOR INDIVIDUALS WITH DISABILITIES. CAREFUL PLANNING IS RE-

QUIRED TO MAXIMIZE GOVERNMENT GRANTS AND BONDS MADE AVAILABLE TO QUAL-

IFIED INDIVIDUALS.

Long term savings for disabled individuals

The RDSP program was introduced to allow individualswith disabilies (the beneciary) or their family members

to establish a long term savings plan to ensure future -

nancial security. This is especially important for individu-

als that require funds to pay for specic care, special

medical aenon or equipment to maintain a quality of

life. However, the funds are not limited to only medical

care costs.

The beneciary, family members, friends or any other

person can make contribuons to an RDSP at any me to

help gain access to government grants and bonds.

Canada Disability Savings Grant

Contribuons to an RDSP account can be eligible for the

Canada Disability Savings Grant and Bond. The savings

grant is available to beneciaries under the age of 49 and

is gained based on the beneciary`s family income level

and the contribuons made during the year. For 2013, if

family income is equal to or less than $87,123:

For the rst $500 contributed the grant will be $3 for

every $1 contributed up to $1,500

For the next $1,000 contributed the grant will be $2

for every $1 contributed up to $2,000 a year

$1,500 needs to be contributed in the year to access the

full $3,500 grant. If the family income is over $87,123

(2013) the grant will be limited to $1 for each $1 contrib-

uted up to a maximum of $1,000. The grant is limited to

$70,000 over the lifeme of the RDSP.

Canada Disability Savings Bond

The government of Canada also provides a savings bondfor beneciaries with lower family income. For 2013, the

bond is accessible to beneciaries with family income of

$43,561 or less and is payable as follows:

If the beneciary`s family income is equal to or less

than $25,356 the government will provide a $1,000

bond.

The $1,000 bond is prorated for family income in ex-

cess of $25,356 up to $43,561.

Once family income exceeds $43,561 no bond is paid. A

beneciary will receive the bond even if no contribuons

are made to the RDSP account during the year. The bond

is limited to $20,000 over the lifeme of the RDSP.

Family income

For the purposes of calculang the Canada Disability Sav-

ings Grant and Bond the government ulizes thresholds

based on family income. For beneciaries that are 18 and

under family income includes income earned by the bene-

ciary and their parents.

In the year the beneciary turns 19 and subsequent years

family income is based on their own income as well as

their spouse or common law's income. It does not maer

if the beneciary sll lives with their parents. Families can

strategically me contribuons into an RDSP to maximize

the grant and bond payments in years where family in-

come falls below any of the above thresholds.

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REGISTERED DISABILITY SAVINGS PLAN

This publicaon has been carefully prepared, but it has been wrien in general terms and should be seen as broad guidance only. The publicaon cannot be relied upon to

cover specic situaons and you should not act, or refrain from acng, upon the informaon contained therein without obtaining specic professional advice. Please contact

Sangha Soppit Chartered Accountants and Advisors to discuss these maers in the context of your parcular circumstances. Sangha Soppit Chartered Accountants and Advi-

sors, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any acon taken or not taken by anyone in reliance on

the informaon in this publicaon or for any decision based on it.

For more informaon, please contact:

Sumeet Sangha, CA Eva Soppit, CA

Partner Partner

Direct: 604-728-7949 Direct: 604-722-4031

sumeet@sanghasoppit.com eva@sanghasoppit.com

Eligibility

In order to open an RDSP account a beneciary must be a

Canadian resident with a valid Social Insurance Number

(SIN). The beneciary must also be eligible to receive the

Disability Tax Credit (DTC) from the CRA. To become eligi-

ble for the DTC a beneciary or their guardians must sub-

mit a from T2201 signed by a heath praconer to the

CRA.

Once approved, the beneciary can then open an RDSP

account at most major nancial instuons and start

making contribuons right away.

Contribuons and withdrawals

Unlike Registered Rerement Savings Plans (RRSPs) con-

tribuons made to an RDSP are not tax deducble in the

year of the contribuon. However, the inial contribu-

ons are not taxable when withdrawn from the plan in

the future. Contribuons over the lifeme of the plan are

limited to $200,000 per beneciary. Investment income

earned in the RDSP is not subject to tax unl the funds are

withdrawn resulng in signicant tax deferrals to grow

the plan when invesng in an RDSP.

When withdrawals are made from the RDSP tax is paid on

the poron of withdrawn funds related to investment

income earned in the plan, as well as, Canada Disability

Savings Grants and Bonds received. This is determined by

a set formula by the CRA however, a poron relang to

the inial contribuons is tax free. This diers from an

RRSP where 100% of the funds withdrawn are taxable.

Once the beneciary reaches the age of 60, minimum

lifeme disability assistance payments (LDAPs) must be

withdrawn from the RDSP each year.

Carry back period

There is a 10 year carry back provision for RDSP contribu-

ons to collect Canada Disability Savings Grants or Bonds

that would have been received had contribuons been

made in previous years. You can carry back contribuons

as far back as 2008 when RDSPs were introduced. Grant

and bond entlements for prior years will be paid up to

an annual maximum of $10,500 for grants and $11,000 forbonds. Careful planning is required so that sucient con-

tribuons are made to maximize this catch up opportuni-

ty. Matching rates will be paid on RDSP contribuons us-

ing up any grant entlements at the highest available rate

rst, followed by any grant entlements at lower rates.

Planning consideraons

When withdrawals are made the beneciary must repay

any Canada Disability Savings Grants or Bonds received

within the 10 years prior to the withdrawal. Grants and

bonds cease to be paid when the beneciary is 49 years of

age regardless of whether the lifeme limits are reached.

It is benecial to maximize the grants and bonds up unl

the age of 49 and maintain savings in the RDSP for 10

years aer grant or bond payments cease. This will result

in no repayments back to the government when with-

drawals are made. The sooner the grant and bond limits

are maximized the sooner the 10 year clock expires and

funds can be accessed without repayment. Careful consid-

eraon with a tax professional is recommended to create

a plan to maximize access to funds within an RDSP.