The Registered Disability Savings Program

Susan Mladenovich, CMA, is an accountant who agreed to write a guest blog about a little understood disability benefit. If you have a disabled dependent or know someone who does, send them the link to this so that they can become more familiar with a new and very important benefit. Life is tough for people who must deal with disability. We need to spread the word so we can take advantage of whatever benefits are available to ease the strain. Email Susan directly at susan@accountingdepartment.ca or visit her website at www.accountingdepartment.ca. Here’s Susan…

As an accountant, I am often involved in helping my clients get access to government funds like the disability tax credit and CPP benefits. It is amazing to me how difficult it is to get information on government programs that help with people suffering from disabilities.

Just before Christmas, a major program finally came into existence, which had been announced in the federal budget in 2007. The Registered Disability Savings Program allows eligible people to qualify for up to $4500 in government grants for a $1500 investment.

If you are the parent of a disabled child, a big question is what will happen when you are no longer there to provide the care you’ve been giving. Years of working to keep the child at home as a participating member of the family all vanishes as the only option is to have the dependent child placed in a home after the parents’ death.

Compounding the issue is the fact that recipients of provincial disability programs are not allowed to accumulate any assets or money, making putting money away for the future nearly impossible.

The Registered Disability Savings Plan (RDSP) will allow people with disabilities to put money aside in an account and allowed to grow tax free until it is needed. This is similar to the new Tax Free Savings Account but is a separate program. There is a $200,000 lifetime contribution limit but no annual limits. Also, anyone can contribute to the plan and there are no restrictions on when or how the funds are used.

In conjunction with the savings plan, the government offers a Disability Savings Grant. For families with an annual net income of less than $75,769 the grant will contribute:

  • $3 for every $1 contributed on the first $500
  • $2 for every $1 contributed on the next $1,000.

For families with net income over $75,769, the grant is $1 for every $1 contributed up to $1000.

There is also a Disability Savings Bond, which provides low-income (under $21,287) families with $1,000 per year without any contributions required. That is 100% FREE MONEY!

A point of clarification: family income depends on the age of the person with disabilities. For individuals under 18, family income would be the combined income of the parents. For a person over 18, family income would be the individual’s income plus their spouse’s income, or just their own income if they are single, even if they live with their parents. So, for several of my clients, the over 18 child living at home only receives disability benefits, leaving their net income well under the limit for the $1000 bond.

The challenge with the program is that the federal government had to work with the provincial governments to ensure that disability recipients would not be penalized by having their benefits reduced. As you can imagine, this has taken quite a long time. British Columbia, Newfoundland and Labrador, Saskatchewan, Manitoba, Yukon, Alberta, and Ontario have all exempted the RDSP as an asset and income when determining a person’s eligibility for provincial disability benefits. Quebec and New Brunswick have exempted the RDSP as an asset and partially exempted any payments from the plan. Prince Edward Island has fully exempted the RDSP for calculating eligibility for income?tested social programs, except where someone’s income exceeds the low?income level defined by the National Council on Welfare.

Okay, let’s do some math.

  • If your net income is under $21, 287 you will receive $1000 with no contributions by you.
  • If the family net income exceeds $75,769, you can receive a maximum of $1000 matched dollar for dollar to your contribution. This is a 100% return on investment!
  • But the magic really happens for those with family income under $75,769. By contributing $1500 the government will give you $3500 ($3 x $500 + $2 x $1000).
  • If you make under $21,287, the total government contribution is $4500. That’s right, $4500 added to your contribution of $1500.

While the launch of the program was finally approved on December 3, 2008, the grants and bonds are an annual amount that do not carry forward (unlike the RESP grants which don’t expire). So to take advantage of the 2008 government contributions, a plan had to be established before December 31st, 2008. Only one bank was offering the plan – Bank of Montreal. However, the deadline for 2008 was extended to March 2nd, 2009 so you still have time to act sock money away for 2008. But time is running out.

The basic requirements are:

  • Eligible for the disability tax credit;
  • Has a social insurance number;
  • Have filed a 2007 and 2008 tax return;
  • Under 50 years of age.

If you need more information, go to www.rdsp.ca or www.plan.ca.

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Gail Vaz-Oxlade

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43 Responses to “The Registered Disability Savings Program”

  1. avatar psychsarah Says:
    January 21, 2009 at 9:31 am

    Thanks for sharing this info. I work with a lot of families that are quite concerned about what will happen if they cannot care for their loved one with a disability at some point. I will keep this blog in the back of my mind to refer to if someone raises this concern with me in the future. I’m so glad to see the government recognizing this need and taking concrete steps to support those who need it most.

  2. It’s great that you are sharing this info. I’m really glad that you will also post info on the Disability Tax Credit. I’ve read recently that the take-up rate of the Disability Tax Credit is only about 16%. So, 84% of eligible families are missing out. Our family receives a few thousand dollars a year from this, which is money that helps our child tremendously.

    One thing I’ve never seen discussed is that the Federal guidelines for the Disability Tax Credit and Savings Account are written in a very confusing way. When our child was a baby, we read the guidelines and concluded that she did not fit the parameters at all. Then, a friend whose child has similar health issues told us that a CA told her that her child would, in fact, be recognized as having a disability. We applied as well, and we were surprised to receive a large retro.

    From what I can infer, the main thing is that the child have a difficult health issue that takes many hours a week to accommodate. This may or may not look like what people typically think of as a “disability.” Gail, I know that more info about how to qualify for these programs would be invaluable. Thanks!

  3. Dear Susan,

    Our story sounds just like yours and the reason your child wouldn’t qualify when a baby was the rules were expanded only in 2005. We also received a great retro. Our daughter is connected with a facility that deals with special needs kids/youth and they are most helpful in keeping us up to date on this stuff. If you don’t have that connection yet, it’s worth searching for one closest to your area.

    Great topic Gail!

  4. Wow, I wish I had heard something about this a long time ago…my brother is now older (we’re 18 mos apart), but I told my mom about this and copied it and sent it to her. Can he do this on his own? He struggling financially, and most of his income goes to medication…I agree with everyone – super topic! And would he qualify for any retro I wonder…he’s now 29.

  5. Dear Michelle,

    The forms are available from the Government of Canada website and his doctor would be able to help in knowing if he’d qualify as the doctor does have to complete a section of the form and sign off on it. Good luck.

  6. Thanks, Dianne. I think my mom has the form already. Hopefully he can take advantage of this!

  7. Michelle,
    To the best of my knowledge, the ‘qualification’ is solely based on whether the individual qualifies for the Disabilty Tax Credit (DTC) on their Income Tax form.

    And, the DTC gives them annual credits on their annual Income Tax, independant of the RDSP.

    Dan

  8. Michelle,
    If your brother’s medical issues have been challenging and time consuming for years, then I think he would qualify for a retro. It’s definitely worth looking into.

    I would not just rely on a doctor’s opinion about qualification for the Disability Tax Credit. As I said earlier, our child really did not seem to fit the parameters, even though we’d read the Federal guidelines very carefully. It was only with the input from a CA that we thought it might be worthwhile to apply anyway. (This was about 7 years ago, before the guidelines were expanded.) I think that anyone with very time-consuming medical issues should check into the tax credit. Part of a retro could be a great way to start a Disability Savings Plan, triggering more grants in the process.

  9. Would those who qualify for programs such as ODSP qualify for this? I would assume they would automatically qualify for the DTC?

  10. Hi everyone:

    Here is the link from the CRA website regarding the DTC (Disability Tax Credit)

    http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/316/menu-eng.html

    If you are not sure or are unclear about the conditions to qualify call this number 1-800-959-8281, the people answering your call will be more than be willing to clear up any confussion or questions you may have.

    If you have a disability and you haven’t yet applied for DTC, it is in your best interest to get your application filled out and into the CRA before you file your taxes so that you know if you qualify and can make that deduction for your 2008 return, if you were qualified for the tax year 2008.

    HTH

    Cynthia

  11. avatar Melanie Reformed Spender Says:
    January 22, 2009 at 12:48 am

    The qualifying process can be brutal. It took my father years of seeing doctors and filling out forms before he was approved. He ended up having to go to a lawyer who specializes in disability benefits to qualify for the program. The wording the doctor uses when filling out the form can change everything.

    Unfortunately, this info cannot help my father because he is over 50 and in Nova Scotia.

  12. Thank you for posting this! I qualify for the disability tax credit, so it’s great to know that I qualify also for the RDSP. I do have a question though, if any one can answer: I went into an RBC branch on Tuesday to see if I could open an RDSP with my old RRSP funds, and they said that they won’t offer the RDSP until April! That would mean that I wouldn’t qualify to use my contributions from last year, but since I’ll be able to put in more money this year, it actually matters to use the 2008 contributions. Does this mean I have to go to BMO to open an RDSP? Does it matter that I don’t bank with them normally? Thank you!

  13. Hi Cassandra

    I am also planning to sign up for RDSP for myself and my bank does not offer it yet and who knows when. I plan to go to BMO branch to open a customer profile and then call their investment line to open the RDSP.

    If my bank offers it later I may transfer the account to my bank if not I will stick with BMO. I just don’t want to lose my $3500 for 2008.

    So yes go to BMO and start opening the RDSP even though you are not a client of BMO.

    Take care

  14. The only objection I have is that since the only provider is BMO I am stuck with dealing with them. Seems like most financial institution are not willing to provide this service.

  15. […] once you are eligible for the DTC, you are automatically qualified for the Registered Disability Savings Account including all the grants and bonds. […]

  16. Hello, I came across an org. known as the National Benefit Authority (formerly Canadian P’Tach Society) at http://www.thenba.ca. They help people with disabilities file for tax credits — up to $30K. They ask for a $25 upfront fee, and 25% of any money that you succeed in getting from the gov’t. Does 25% sound like a fair amount to pay? Would anyone be able to recommend a disabilities lawyer in T.O. who specializes in getting the DTC?

  17. I am also curious about the National Benefit Authority. I have received their application package but am hesitant because they have an aggressive marketing approach. Are they legit? Is there money available for me? I am a 40-something Yuffy (Young Urban Failure) and have just been diagnosed with ADHD. I am near London, ON.

  18. Click here….

    Nice site. Check out this one sometime……

  19. Royal Bank also offers the RDSP, and is where I am opening mine.

    I found a group called Plan.ca (website), all about benefits to persons with disabilities, and they do recommend the Royal Bank for the RDSP

  20. avatar Tania Kroman Says:
    November 20, 2009 at 11:49 am

    I talked to Revenue Canada today and they said the RSDP account was available up to age 59, not 50 as mentioned in the article. My husband is 53 and working, but his disability will require early retirement, so we qualify.

  21. avatar Crossesfour Says:
    March 5, 2010 at 3:58 pm

    The so-called National Benefits Authority is a semi-scam. They only do what any competent account or H&H Block office can do. Problem is, they charge 30% to do it, the professionals would charge $100 or so. Believe me, 30% of an anticipated refund of $1,300 each year, is a LOT of money! And remember, they can only get money back, that you had previously paid Revenue Canada in income taxes. So if you are low-income and don’t pay taxes, you will get nothing back!

  22. I have just qualified for the Disability Tax Credit, but what good is opening up a Registered Disability Savings Account? I do not qualify for the savings bond or grant because I am 59, the cutoff age is 49, for contributions from the government.

    Question, is there any point in opening up a Registered Disability Savings Account? I have till the end of this year, just prior to turning 60 years, which is the cutoff date for opening it.

    And my comment on the National Benefits Authority and the fee they charge for getting retroactive tax from Revenue Canada, one does not need them. I contacted one group that was similar and was told by the employee that I would not qualify for the DTC. Several years later I had a specialist do the application, Revenue Canada wantes some more information and then I got the DTC.

    Similar types of entrepnreneural ventures exist with the application for the Green Card Diversity Lottery in the USA. The US government warns on their Diversity Visa website that there is no fee to enter and that sites posing under the facade of the US Government are charging a fee to enter. The US Government goes on to state it makes no difference in the outcome, your chances are not any better by using one of these companies.

  23. One of the things they (Banks) tell you is how to turn $20,000 in an RDSP into $30,0000 which grows into $164,000 in twenty years!

    Let me explain.

    Lets assume a 18 year old man or woman has a disability an income is low.
    Parents buy a $20,000 dollar annuity which is guaranteed to pay $30,000 over 20 years. This money is put into an RDSP matching bonds and grants over the next 20 years equal $90,000. Lets assume a 3% growth on this money and in 20 years you have $164,000.

    Key points are annuities change daily, but once bought are guaranteed. Banks can not/will not shop for best annuities. Also, the RDSP are a plus there still is a number of other things that can guarantee a lifetime of income for the young adult.

  24. I’m looking at the National Ben. Auth. forms right now. not sure what to do about the situation tho. Have been on disability for almost 6 yrs (Manulife & CPP disability) but was declined for the tax credit. Does this make any sense at all?? I’ve had cancer 2x last 5 yrs, severely depressed to the point i can’t remember dates or if i paid all the bills, anxiety, thoughts of suicide….i do see a psychiatrist on regular basis, and on meds for both depression and cancer. How the hell do I not qualify as disabled?…… Do they decline everyone who isn’t blind, in a wheel chair, or a complete vegetable?

  25. Hi Hillary,

    Most people with cancer alone would not qualify for the Disability Tax Credit. You would require 14 hours of chemotherapy per week to qualify. Mental illnesses are a tricky thing to capture on the DTC application, and your psychiatrist (if he/she were the one who signed it) probably does not have the expertise required to fill out the form ideally, or did not attach enough supporting information.

    The National Benefit Authority charges 30% plus an application fee to do the work. We (HandyTax) do it at a much better rate. We look forward to hearing from you.

    Take Care,

    Jeremy

  26. Hillary,

    No they don’t deny everyone but it is your doctor who filled the forms out wrong, steer clear of NBA they take a nice chunk out of the initial lump sum you can back which I know you could use for more important things.

    First off get your T2201 forms, for you I would say this is how it should look in section A to #1 yes, #2 no, #3 no, #4 yes, #5 yes (1, 4, and 5 are MUSTS to have it approved and you MUST have two of #4)

    For section B

    fill out “Walking” as markedly restricted, this is NOT at all like it sounds, and this is what you tell your doctor “because of my treatments I suffer from severe fatigue when walking, I get tired easily and need to stop, I must stop because of the fatigue when walking even a few meters. I also get fatigued and off balance when climbing stairs and try to avoid them whenever possible”. If you are on or end post cancer treatment these are all side effects that can last YEARS even after remission has been achieved due to side effects of chemo and radiation.

    you will need your medical doctor or psychiatrist to fill out the “Mental functions necessary for everyday life section” they will most likely have it fall under this “Important – a restriction in problem-solving, goal-setting, or judgement that markedly restricts adaptive functioning, all or substantially all the time, would qualify.”

    Under Effects of impairment, you MUST tell your doctor how your disability effects your everyday life in a way it would be seen as an impairment. “I get so tired and weak it takes me 5mins to walk a city block, my arms get weak when I raise them above my head and I have trouble brushing my hair and teeth. My mental impairment is so bad that there are times I am so depressed I do not go out of the house for weeks, I have trouble maintaining friendship, and forget appointments and other important things. I have troubles functioning multiple times everyday.”

    Duration: It ONLY has to be said that it will last at least 12 months, if it is shorter than a year you are disqualified, it is OKAY for your doctor to say a year and put an expected recovery year of 12-36 months down the road, this just means it will be renewed at the end of that time period. Some people have to reapply every year, for us one son we have to reapply every 4 and the other not until he’s 18 (he’s 4 currently) this is because of the difference in severity between the two.

    ANY cancer patient that is markedly restricted in at least TWO AREAS for at least 12 months can qualify, the papers just have to be filled out right. Do not be afraid to tell them exactly how it effects you, if you have to pee or have a bowel movement every hour and have to race to the bathroom so you don’t go in your pants tell them. If you are too exhausted to crawl out of bed some days, tell them. Anything that you think it too little to care about can show a pattern to them and show them that even though everyday it might not be the same symptoms restricting you there is always something limiting your daily life.

    I have done COUNTLESS forms with people and have not had one person come back denied. I have filled out forms three times in total for my boys and never been denied. After all is said and done and you are approved, if it can go back farther then the government initially goes back all you do is write a letter to them and say “I was not told about this program until *X* date, my initial doctor incorrectly filled out that forms after that date and I was denied. I wish for the CRA to review my taxes from years *x* to *x* and apply the credit”. With all the families, and ourselves, this was all we needed and out claims were applied back to the date of diagnosis, or in our middle childs case birth since it was birth trauma. No payments to anyone, we got back $7635 for my oldest son and $6500 for our middle child (because of how soon we were able to do them they didn’t need to go back too far to correct), our neighbor I got her back $18,900 for her son. If you take off the fee NBA takes from you that is a LOT of money that could be used for other more important things…..our neighbor was getting evicted, they used the money they got back the down payment on a house that will be left to their son.

  27. avatar Steve Robbins Says:
    December 12, 2010 at 5:17 pm

    Many canadians are unaware that the canadian government offers tax benefits and grants for anyone who has a physical or mental disability. Unfortunately collecting these benefits can be complicated and stressful. At the Canadian Disability Corporation they simplify the process to make sure you obtain every dollar possible from the CRA. On top of this, they will also ensure you’re applied to other programs available to people with disabilities such as the Registered Disability Savings Plan (RDSP).
    http://www.canadadisability.ca/

  28. […] The NEW Registered Disability Savings Program « gailvazoxlade.com 21 Jan 2009. This is similar to the new Tax Free Savings Account but is a separate program.. Quebec and New Brunswick have exempted the RDSP as an asset and partially.. Hello, I came across an org. known as the National Benefit.gailvazoxlade.com/blog/archives/338 – The NEW Registered Disability Savings Program « gailvazoxlade.com […]

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  33. So today I phd CRA to find out some info regarding my account for the DTC. I also inquired as to the Registered Disability Saving Account and was told that I could get the grant retroactive for 6 yrs. He told me that if I were to put in $6K this year, I would get a grant for $6K also. I didn’t think this was a retroactive program and went over that with him, but he assured me I would be entitled to the $6k grant (assuming I made a deposit of $6k).

    Is this “great” news for me; or is he sorely misinformed? Thoughts?

  34. OMG – I was back at the CRA site, and he is CORRECT – from the CRA website: “Since 2011, you are allowed to carry forward unused grant and bond entitlements to future years. The carry forward period can only start after 2007 and lasts for 10 years”

  35. […] once you are eligible for the DTC, you are automatically qualified for the Registered Disability Savings Account including all the grants and bonds. […]

    hi can you please explain more and how this works , do i have to register my self and how please and thank you

  36. Once you are approved for the DTC what are the next steps required for the RDSP?

  37. 10 years ago I was diagnosed with severe rheumatoid arthritis, and decided to apply for the RDSP. But after filling out the paperwork with my doctor, and sending it in, I unfortunately got declined. I did have the choice of appealing it, but decided not to, cause I thought that it wouldn’t make much difference in the outcome anyways. So sometime later on I will try to apply again and see what happens. I am now 36 years old and would like to save even more for my future.

    Any thoughts on any other way I could get accepted for the RDSP benefit?

    Thankyou

  38. My mom is a type one diabetic on the insulin pump and has just found out that she qualifies for the disability tax credit. She has been on the pump 10yrs, and it sounds she will be able to retro-actively receive all or some of the disability tax credit. The thing i’m wondering about is the grants and the bonds. The problem is that she is already 49, and turning 50 in May. Did we really just miss our window by 4 months? Or is there any way we could still retroactively receive grants and bonds as well?

  39. Well, the big thing we found for getting accepted for the DTC was that we went under the combined less severe disabilities equal to one severe disability idea. My husband suffered a neck injury in 1996, and it took until 2002 when it made itself known the first time by causing him a brief ‘paralysis’ (he was frozen to the spot he was standing for over 20 minutes before a co-worker noticed him, called for help, and they got him moved to a place to sit). He had constant shoulder pain since then, and burning and numbness in his arms, back, hands. It got really severely aggravated again in 2008, when we had to go bankrupt both business and personal due to SEVERE pain and numbness/burning.

    After years of fighting, we got him his WCB pension for one injury resulting from that incident, and are working on the second one. (Just stating all this so you’ll know where we’re coming from, and see that the disability you have is not necessarily what will get you the DTC).

    NOW – what we ended up succeeding with, is that Joey’s ability to walk even a short distance was severely impaired – he couldn’t walk 100 yards without stopping to rest just due to pain. In addition, for some reason it came to pass that it takes him almost an hour to empty his bowels – just plain ol’ time sitting on the can when he can’t do anything. Sometimes more than once a day – so there is no job that is going to let its employee sit on the can 1-2 hours a day!

    Those two disabilities and the length of time they took (far beyond a normal individual’s required time to complete the tasks) combined together entitled Joey to receive the credit.

    SO if there is any way for you to put the affects of your severe arthritis under the available categories (very slow to dress yourself, very slow to feed yourself, cannot walk 100 yards or would take you an inordinate amount of time to do so, etc) you can then combine them to equal one severe disability.

    It’s important to have your family doctor in on this, as he may be contacted a second time by HRDC to clarify your abilities. Ours was, and he was doubtful we’d get it – yet here we are, approved on April 10, 2013, only 4 months after we applied. (It would have been less than three, but HRDC forgot to send us a notice in February that they needed further clarification from our doctor, and did not send him the forms either until I called Rev Canada and asked them what was going on, and then to resend both the form to him/notice to us once I understood the delay.)

    I’ve already made an appointment with the RBC to get an RDSP opened for Joey – going to take advantage of the $1000 bonds (free no charge!) that Joey is entitled to (back as far as 2008) and the 3-1 and 2-1 dollar for dollar contributions the government is willing to make for every dollar we put in!

  40. Thank you for the information – my son was born with a traumatic brain injury, and has required hundreds of hours of therapy. While he’s doing very well, we continue to work with therapists and numerous pediatricians to keep him progressing.

    We recently submitted the T2201 form and are awaiting our verdict. He should be covered under the prolonged and globally affected criteria, but it was helpful to have this blog entry and the other for the actual T2201 form. I’ve been finding the entire process daunting, as I’m also pregnant with my second, work full-time and am in university part-time! We are also now pursuing the Assisted Devices funding as well for our son’s continued needs, which was another whole ballgame.

    Posts like this help us wade through the murky waters of government funding. Thank you again!

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