The NEW Registered Disability Savings Program
Posted by Gail | Filed under Gail Club News, Saving
Gail Club Alert: Lynda in the Windsor/Essex County area, Jessie in Calgary, and Derek in Toronto are interested in joining or starting a Gail Club. If you want to hook up with Lynda, Jessie, or Derek, email me at getgvo@gmail.com and I’ll send on your contact info. Jessie had a slew of responses so you may end up with two clubs in Calgary if you also bring your family and friends to the group. Good for you!
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 (which Gail has asked me to write about another time);
- 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.
For a first person account of a parent navigating through applying for the program, go to http://dailyhomerenotips.com/2008/12/20/registered-disability-savings-plan-rdsp-time-running-out-for-2008/ . There is a link there to the BMO group as well.
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.
January 21, 2009 at 10:41 am
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!
January 21, 2009 at 11:28 am
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!
January 21, 2009 at 12:06 pm
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.
January 21, 2009 at 1:19 pm
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.
January 21, 2009 at 2:50 pm
Thanks, Dianne. I think my mom has the form already. Hopefully he can take advantage of this!
January 21, 2009 at 4:29 pm
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
January 21, 2009 at 7:19 pm
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.
January 21, 2009 at 8:29 pm
Would those who qualify for programs such as ODSP qualify for this? I would assume they would automatically qualify for the DTC?
January 21, 2009 at 8:56 pm
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
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.
January 22, 2009 at 10:30 am
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!
January 22, 2009 at 11:21 am
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
February 3, 2009 at 11:30 am
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.
February 10, 2009 at 4:59 am
[...] once you are eligible for the DTC, you are automatically qualified for the Registered Disability Savings Account including all the grants and bonds. [...]
February 27, 2009 at 1:46 pm
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?
April 7, 2009 at 3:18 pm
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.
April 17, 2009 at 2:33 am
Click here….
Nice site. Check out this one sometime……
October 14, 2009 at 7:51 pm
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
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.
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!
March 13, 2010 at 12:24 am
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.
March 27, 2010 at 11:34 pm
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.