Financial Fitness: You could qualify for a disability savings plan

The Registered Disability Savings Plan (RDSP) was introduced in 2008 to help individuals with severe and prolonged disabilities save for their long-term financial security.

However, many Canadians have not yet taken advantage of its benefits, which can help the
disabled provide a better future for themselves and their families.

A participant may hold only one RDSP account, which is limited to a lifetime total of $200,000 including rollovers (see below) in non-government contributions. Contributions are not tax-deductible, and the plan is not designed as a short-term savings vehicle or for regularly withdrawing money in the short term.

RDSP benefits includes contributions that accumulate tax-free until the money is withdrawn and contributions that do not impact federal benefits and have little, if any, impact on provincial benefits.

If eligible, you can help build your RDSP with government disability grants and bond contributions.

Savings bonds

The government may pay into an RDSP, a Canada disability savings bond of up to $1,000 annually, to a maximum lifetime limit of $20,000, dependent only on family net income with no personal contributions required.

Savings grants

An RDSP beneficiary may receive a Canada disability savings grant of up to $3,500 per year, to a maximum lifetime limit of $70,000. The amount is based on contributions and family net income.

Both bonds and grants are available until the year the participant turns 49. Generally, bonds and grants must remain in the account for 10 years before a withdrawal may be made, and withdrawals must begin by the end of the year in which the participant turns 60. Additionally, for any account established on or after January 2011, the RDSP may carry forward unused grant and bond entitlements up to 10 years preceding its opening.

Rollover option

As of July 2011, a deceased individual’s Registered Retirement Savings Plan (RRSP), Registered
Retirement Income Fund (RRIF) or Registered Pension Plan (RPP) can be rolled on a tax-deferred basis into an RDSP (up to the total contribution level of $200,000 not including government contributions) for a financially dependent infirm child or grandchild. This option is often overlooked.

It’s important to be informed about the steps you can take today for your financial future, including knowing if you or a family member may qualify for the RDSP.

Deborah Leahy is an Investment Advisor with Edward Jones. Member – Canadian Investor Protection Fund

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