Breaking through barriers for workers
who have children with special needs

The Registered Disability Savings Plan (RDSP)

Families will soon have a new planning tool to assist them in securing the financial future for their relatives with disabilities. It's expected that the new Registered Disability Savings Plan will be available in financial institutions in December 2008.

The RDSP will provide a tax-deferred means for saving. Any person qualifying for the Disability Tax Credit can open an RDSP.

The Canada Disability Savings Grant will match contributions by as much as 3-to-1. Where people's incomes are less than $74,357 a contribution of $1,500 will result in a matching grant of $3,500. There is a $200,000 lifetime contribution limit and the limit on the Grant is $70,000 over the person's lifetime. Anybody can contribute to a person's RDSP.

The Canada Disability Savings Bond, for people with incomes below $20,883, will provide up to $1,000 per year for 20 years to a person's plan.

Federally, asset and income tested programs (tax exemptions or benefits received by people with disabilities) should not be affected. Provincially, BC and Newfoundland are the only provinces, to date, to have given the RDSP a complete exemption. This means that according to any of their supports, benefits, tax exemptions, pensions (any asset and income tested programs), the RDSP does not exist. People can accumulate as much as they want in the RDSP, and withdraw funds and spend the money in any way they want (no restrictions).

The remaining provinces have yet to announce how they are going to treat the RDSP. If you live outside BC or NL you need to monitor any provincial announcements related to the RDSP (you can do this by checking PLAN's blog). It is expected that most provinces will announce something before the RDSP rolls-out in December. This will be key factor for people deciding whether they want to set up an RDSP.

A couple of things need to be in place before your child can be eligible for the RDSP.

1. The individual with the disability has to be eligible for the Disability Tax Credit (DTC). Even if your child was rejected before, try again. The government has loosened the guidelines for the DTC.

2. Your adult child has to have filed an income tax return, even if they are not making any money.