Know Someone with a Disability?
Then we hope you know there is tremendous new incentive for saving for the individual's long-term financial security. The federal government will throw in up to $70,000 in grants to a Registered Disability Savings Plan (RDSP) and allow all earnings to grow tax-deferred until eventually withdrawn.
Families and anyone else with permission of the plan holder can make contributions to the RDSP until the end of the year the beneficiary turns age 59. The lifetime maximum for contributions is $200,000 and there is no annual limit. Depending on family income and contributions, the government will add up to $3,500 in grants a year until the individual turns 49. Further assistance by way of government bonds is available for low-income families unable to contribute to an RDSP. Note that to establish an RDSP, the individual must be eligible for the Disability Tax Credit, meaning they must have a severe and prolonged mental or physical impairment.
Another significant benefit of RDSPs is that when money is withdrawn later in life, it will have no impact on the person's income-tested government benefits like OAS, CPP/QPP or GST/HST credits. The income and government contributions will be taxed at the presumably low rate of the disabled person, but the original contributions paid out will be tax-free.
As for estate planning opportunities, parents or guardians can make a bequest in their wills to top up an RDSP. Earlier this year, the government enhanced the flexibility of the RDSP by allowing the RRSPs and RRIFs of deceased parents or guardians to be rolled over tax free to an RDSP, within the disabled individual's limits. This is terrific news.
The rules around the new RDSP are quite complex. If you are a parent, caregiver or guardian of a disabled person, we encourage you to call for an appointment. Let us help you make best use of the RDSP and secure the future of your loved one.
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This Report is written by Investment Planning Counsel, a fully integrated Wealth Management Company. Mutual funds available through IPC Investment Corporation and IPC Securities Corporation. Securities available through IPC Securities Corporation, a member of CIPF. Insurance products available through IPC Estate Services Inc. Mortgage broker services provided by IPC Save Inc. (ON Lic. #10227).