Registered Savings Plans / RDSPs - Registered Disability Savings Plans
RDSPs - Registered Disability Savings Plans
The Registered Disability Savings Plan was introduced to Canadians in 2009. It is a savings plan intended to help families and others save for the long term financial security of a person with a disability.
An RDSP can be established for a Canadian resident aged 59 and under(excluding plan transfers), who is eligible for the Disability Tax Credit and has a valid Social Insurance Number. Contributions are not tax deductible and can be made until the end of the year in which the beneficiary turns 59 years of age.The lifetime maximum for contributions to a registered disability savings plan (RDSP) is $200,000,there is no annual limit for contributions.
The Government will provide matching grants of up to 300% depending on the amount contributed and the beneficiary's family income(Canadian Disability Savings Grant). This is subject to a maximum annual deposit of $3500, with a lifetime limit of $70,000. In addition, low income and modest income Canadians that have set up an RDSP may also qualify for the Canadian Disability Saving Bond(CDSB).
Beneficiaries that qualify for the bond will receive up to $1000 a year from the Government of Canada with a lifetime limit of $20,000. The bond and the grant will be paid into the RDSP until the year the beneficiary turns 49 years old. You do not need to make a contribution to the RDSP to receive the bond.
New Rules from 2010 Budget
Rollover of RRSP, RRIF or RPP to RDSP
Budget of September 2010 proposed to allow a tax-deferred rollover of a deceased individual's RRSP/RRIF or RPP proceeds to the Registered Disability Savings Plan (RDSP) of a financially dependent infirm child or grandchild. This will be effective for deaths occurring on or after March 4, 2010. The actual transfer to the RDSP, however, cannot be made until after June 2011. Previously, the proceeds could only be received on a tax-deferred basis by a financially dependent infirm child or grandchild under 18 years of age by a transfer to the RRSP, RRIF or eligible annuity of the child or grandchild. The lifetime maximum contribution to an RDSP ($200,000) still applies.
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Tips
There can only be one beneficiary per RDSP.
The beneficiary is the person who will receive the money in the future,
The holder is the person or organization that opens and manages the RDSP. For beneficiaries over the age of majority, the holder will generally be the beneficiary, but in certain circumstances a guardian, legal representative or public department may be eligible to become the holder.
Beginning in the year the beneficiary turns 19, the family income is based on his/her income plus their spouses' income. Prior to age 19 family income is based on the income information that was used to determine the Canada Child tax Benefit for the beneficiary.
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