- What is an RDSP?
The federal government launched the Registered Disability Savings Plan (RDSP) as a way for individuals who have disabilities and their families save money for the future needs of the person with the disability.
- What’s the criteria to open an RDSP?
In order to open an RDSP, the individual with the disability must have the Disability Tax Credit (DTC), be a Canadian citizen and have a social insurance number (SIN).
- What are the advantages of having an RDSP?
There are a number of advantages of having an RDSP: The first being that the person with the disability, does not have to be the owner of the RDSP. A parent or guardian can own the RDSP on behave of their child (under age 18). Once the child reaches 18, parents can still own the RDSP or become joint owners. However, guardians can no longer be an owner once the child reaches the age of 18.
In order to own an RDSP, the individual must have the ability to make financial decisions independently and be legally competent. If the adult cannot make financial decisions on their own and is not legally competent, the federal government will allow a parent, spouse or a common-law partner to own the RDSP.
Funds held in an RDSP are an exempt asset as far as your eligibility to receive assistance through the Ontario Disability Support Program (ODSP), so is the amount. A person that receives an income from ODSP can also own an RDSP without it affecting their income.
The Federal government will deposit up in $70,000 in grants and up to $20,000 in bonds into an RDSP up until the end of the year of the beneficiaries 49th, birthday. The amount of the grants and bonds are based family income. Once the beneficiary turns 18, the amount the government deposits would be based on their income. Grants are based on contributions, so for the first $500 of personal contributions, the government will deposit up to $3.00 for every $1.00. For the next $1,000 the government will deposit $2.00. Bonds are not based on personal contributions, so an RDSP can be opened and as long as the beneficiary has the Disability Tax Credit (DTC), the federal government will deposit up to a $1,000 a year for 20 years. Both grants and bonds are retroactive, which means that the government will deposit grants and bonds for up to the previous 10 years. Based on the diagnosis of the disability or impairment.
Funds must start to be withdrawn in the form of the Lifetime Disability Assistance Payments (LDAP) by the end of the year of the beneficiaries 60th, birthday and funds can be spent on whatever the beneficiary wishes.
- Can I take money out of my RDSP?
If you take money out of your RDSP, there are penalties.The government will take back $3.00 of grants and bonds deposited for every $1.00 taken from the RDSP. This is called the 10 Year Proportional Repayment Rule.
- What is the process of opening an RDSP?
There are 3 simple steps to opening an RDSP if you have the Disability Tax Credit (DTC - If you do not have the DTC, there is an extra step)
Step #1 – Meet with a Financial Advisor and fill out a document called the Know Your Client (KYC) document. This document is vital to opening an RDSP because it gives the Advisor an indication of your risk tolerance. Funds are chosen based on this document, so if this document is not filled out, an RDSP cannot be opened.
Step #2 – Once the investment fund(s) are chosen, the Advisor will complete the paperwork.
Step #3 - Once the paperwork is filed out the Advisor either will meet with you in person to obtain your signatures or send the documents to you for your electronic signatures. Once signatures are obtained, the Advisor will then submit the paperwork for processing
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