Tag Archives | RDSP

Disability Savings Benefits For Low-Income Families With Special Needs

By on May 30, 2014 in Special Needs

Canada Disability Savings Bonds

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The Registered Disability Savings Plan (RDSP) is a wonderful savings vehicle for people with prolonged disability. It may attract two key benefits from the government. One is the Canada Disability Savings Grants, a very helpful matching grant to enhance the savings for the person with special needs. However, I’m often being asked the question: “If a low-income family could not afford to make any contribution now, how could they get benefited from having a RDSP account?” This is when the Canada Disability Savings Bonds (CDSB) comes into play.

 

The CDSB is designed to provide extra funding for low-income families with disability. Unlike the matching grants, the CDSB does not require the family with disability to make any contribution. The government will solely look at the net family income, and decide how much disability savings bond will be deposited into the disabled person’s RDSP account. The maximum lifetime CDSB one may receive from the government is $20,000.

According to the Canada Revenue Agency’s Website:

“The amount of the bond is based on the beneficiary’s family income. The beneficiary family income thresholds are indexed each year to inflation. The income thresholds for 2013 are as follows:

  • $25,356 or less (or if the holder is a public institution), the bond is $1,000;
  • between $25,356 and $43,561, part of the $1,000 is based on the formula in the Canada Disability Savings Act;
  • more than $43,561, no bond is paid.”

* Note that for minor beneficiary, the family net income is that of his or her parents, while beneficiary over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable.

Another very appealing rule is that unclaimed CDSBs may be carried forwarded. One may claim back the amount up to 2008 or the year the beneficiary is eligible for the disability tax credit, whichever comes the later. The maximum carried forward period can last for 10 years.

 

Let me show you a real life example:

Awhile ago, I met a single mother where the child is diagnosed with autism. In our conservation, she revealed that she was unemployed for a long time, and did not have much savings to make any contribution into the RDSP account. Knowing that the child was already approved with the disability tax credit before 2008, I advised her to setup the RDSP account.

Given that her net family income has always been below the first threshold of $25,356, the child is entitled to $1000 of bonds since 2008. (Note that the income thresholds are indexed each year to inflation). After we setup the RDSP, the government has deposited $6000 into the account. (This is the 6 years of disability savings bonds from 2008 to 2013)

The $6000 is now growing within the investment portfolio that is suitable for this family. The best thing is this family did not even contribute a single dollar into the RDSP to make this happen.

 

Disclaimer:
This article is for general information only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please consult an appropriate professional regarding your particular circumstances. This article does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation. References in this article to third party goods or services should not be regarded as an endorsement of these goods or services. This article is intended for Ontario, Canadian residents only and the information contained herein is subject to change without notice. The owner of this article is not liable for any inaccuracies in the information provided. Image Courtesy khunaspix/ FreeDigitalPhotos.net

 

Have any questions about the Registered Disability Savings Plan? Feel free to connect with me!

 

Samuel Li
Investment Fund Advisor | Investia Financial Services Inc.
Sales Manager & Financial Consultant | Excel Insurance Agency Inc.
Mobile: 647-294-0702
Email: [email protected]
Website: http//SamuelConsultant.com
80 Acadia Ave., Suite 205, Markham, Ontario. L3R9V1

 

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Up To $90,000 Disability Savings Benefit From The Government

By on May 13, 2014 in Special Needs

Registered Disability Savings Plan (RDSP)

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Whenever I talk to clients who have disabled family member, they usually show huge concern whether there will be enough financial resources for the disabled dependent. It is not hard to understand that people with special needs and their loved ones could face a distinct set of financial challenges throughout their lives. To help address these challenges, the Government of Canada introduced the Registered Disability Savings Plan (RDSP) back in 2008. This is a wonderful saving tool designed to help building long-term savings for disabled persons. The RDSP makes it easier to accumulate funds by providing assisted savings and tax-deferred investment growth.

 

How Does It Work?

There are two key benefits within the RDSP, they are the Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Grants (CDSBs).

The Canada Disability Savings Grants (CDSGs) is a matching grant where the government will deposit the funding into your RDSP account based on your family income and your contribution. The maximum lifetime benefit per beneficiary is up to $70,000. Although it varies from each individual case, many families that I’m working with did receive up to 300% of the matching grants on a portion of their contribution.

To provide even more assistance for low income families with disabilities, there is the Canada Disability Savings Bonds (CDSBs). Unlike the matching grant, the disability savings bonds do not require any contribution. The government will review solely on the family income. If the income is not beyond the program’s limit, up to $1000/year will be deposited into the RDSP account. The maximum lifetime benefit per beneficiary is up to $20,000.

 

Who is Eligible for RDSP?
A Canadian resident with SIN, contributions to the RDSP can be made until the end of the year in which the beneficiary turns 59, and one must be eligible for the Disability Tax Credit (DTC).

However, the government grants and bonds will only be paid until December 31 of the year the beneficiary turns 49. The DTC is available to individuals who have mental or physical impairments that markedly restrict their ability to perform one or more of the basic activities of living (i.e., speaking, hearing or walking). The impairment must be expected to last a period of one or more years, and a physician must certify the extent of the disability. Individuals can apply to the Canada Revenue Agency (CRA) for the DTC using form T2201.

 

Disclaimer:
This article is for general information only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please consult an appropriate professional regarding your particular circumstances. This article does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation. References in this article to third party goods or services should not be regarded as an endorsement of these goods or services. This article is intended for Ontario, Canadian residents only and the information contained herein is subject to change without notice. The owner of this article is not liable for any inaccuracies in the information provided.Image Courtesy Stuart Miles/ FreeDigitalPhotos.net

 

Samuel Li,
Investment Fund Advisor | Investia Financial Services Inc.
Sales Manager & Financial Consultant | Excel Insurance Agency Inc.
Mobile: 647-294-0702
Email: [email protected]
Website: http//SamuelConsultant.com
80 Acadia Ave., Suite 205, Markham, Ontario. L3R9V1

Comments { 1 }