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RDSPs should be no secret

Registered Disability Savings Plans are secret – but they shouldn’t be.

If people knew what we have here, they’d be embracing this opportunity to expand savings and resources for so many children and adults who can qualify today.

RDSPs offer enormous advantages. For households that are low-income, middle or high-income, singles or families, RDSPs open a wealth of opportunity we can design uniquely for each situation. As we briefly touch the surface here, you can reach us for further help. Even more important in pondering this, don’t only think about “WHO” could use this (ie. the person with a disability) or “WHAT” (ie. nature of the disability) but dive deeper into “WHY” which is the difference available here in the life of a person and their loved ones. Plus, who wouldn’t rejoice to accelerate their life savings with rich government grants and tax-sheltering.

Our RDSP beneficiaries have ranged from infancy to boomers.

To open an RDSP one must be eligible for the Disability Tax Credit (ie. severe and lasting physical or mental impairment) starting anytime until the year we turn 60. Owner(s) may be the beneficiary personally who is at least 18, or any family member(s) legally recognized to act for the beneficiary. Deposits can range from just $1 up to a maximum $200,000. Surprisingly this can even include tax-deferred transfers from RRSPs, RRIFs, RPPs of parents and grandparents.

Canada Disability Savings Grants and Bonds add up to a further $70,000 (grants) and $20,000 (bonds) until the year a beneficiary turns 49.

To age 17, grants and bonds depend on parents’ income. After that, they depend on income of the beneficiary alone (and spouse, if applicable).

Sadly, many have never applied even though they could qualify for Disability Tax Credit and the RDSP. Good news is, applying can open a floodgate of new money. If someone would have qualified over the past ten years but failed to apply until now, they can seek carry-forward grants up to $35,000 and bonds up to $10,000.

By contacting me directly or visiting my website (, we offer two links with further information on how to draw income as well as preserve any other income-tested federal programs (CPP, OAS, GIS, GST credits, social assistance benefits). Be aware also, there are a few procedures to follow if a beneficiary dies or overcomes their impairment.

A story or two can show how RDSPs may help families of any income-level:

Jane and Jack are young parents with a handicapped daughter named Jill. Family net income is under $30,000 so they qualify for maximum grants (CDSG) and bonds (CDSB). If they deposit only $1 into an RDSP, Canada will match that with $3 of CDSG plus $1000 of CDSB for a net account value of $1,004. That’s beyond amazing! In addition, if life was so busy that they never applied until Jill was 10 years old, the $1 deposit could attract a further $1,000 for all the missed years for a total $10,000 of bonds, and suddenly reach $10,004. That’s beyond incredible, yet it’s true!

With child tax credit or family gifts, imagine if Jill’s family were able to invest $100 a month into Jill’s RDSP. This magically summons the power of federal grants and bonds ($4,500 per year). In ten years averaging 6% growth, Jill’s RDSP can exceed $200,000 – a vast sum compared to the $12,000 total invested.

Now what happens if we add Jill’s grandparents into this picture. We’ll assume that through the years they have saved well, expanded their wealth, and want to contribute the maximum $200,000 to their granddaughter’s RDSP. Grants and Bonds are only based on the income of Jane and Jack so we can carefully design the gifts and deposits to optimize all government grants. This is entirely flexible for families to contribute within their means, up to $200,000. And all growth remains tax-sheltered.

A different story is Mark at 35, paraplegic since a diving accident at 18. His parents Mary and Mel are willing to assist Mark to the extent he doesn’t lose provincial support and drug benefits. From their Wills, or even as beneficiary from their RRSPs, RRIFs or other savings (by Mark’s age 49) they can contribute up to $200,000 to Mark’s RDSP. Correctly designed this will increase Mark’s financial resources for life, insulate his provincial benefits, and shift the parents’ high-tax assets to Mark’s low tax rate.

One catch – over age 17, the RDSP beneficiary should have a Will (if competent to make one). Otherwise provincial laws of intestacy will arise at the beneficiary’s death. Henson Trusts* (see below) can also fit alongside an RDSP to support the beneficiary for life, and then pay out to other family or philanthropy as desired. In these discussions we include consultation with an estate lawyer.

Of all the families who can qualify for RDSPs, less than one in ten actually own one. That’s a failure! It means you and I can each take a moment at times to consider our friends and family… Who needs this article? Who could find encouragement in reading this?

Disability can be a tough card for anyone and for their family. RDSP is a major boost to help safeguard their wellbeing and income for life.•

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Brian Weatherdon of Sovereign Wealth Management Inc., is a Certified Financial Advisor, retirement coach, and consultant on wealth and aging. 905-637-3500

The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation requiring appropriate legal, accounting, tax and other professional guidance. The views expressed are those of the author and not necessarily those of the issuer of any financial products for which the author may act as a distributor. Any names and/or circumstances mentioned above are altered for confidentiality.

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