Who would qualify for a Registered Disability Savings Plan in Canada?
CC&Associates works directly with RDSP clients. It is a niche market that needs specific advice. Please ask for support from us to ensure you are getting the full value of the savings plan.
In this article, we will explore the topic of Registered Disability Savings Plans and why Canadians need to consider this form of investment:
What is a RDSP?
Who Qualifies for an RDSP?
a) Eligibility for the Disability Tax Credit (DTC)
b) Age Requirements
c) Canadian Residency
How to Open an RDSP?
a)Obtain the Disability Tax Credit (DTC)
b) Choose a Financial Institution
c) If applicable, complete the Grant/Bond application form and the following annex forms.
d) Contribute to the Plan
e) Develop an Investment Strategy
f) Start Beneficiary Payments
Government Help?
a) Canada Disability Savings Grant (CDSG):
b) Canada Disability Savings Bond (CDSB):
1. What is an RDSP?
A Registered Disability Savings Plan (RDSP) is a savings program created by the Canadian government to help individuals with disabilities and their families save for the future.
RDSPs are designed to provide long-term financial security and support for those living with a disability, ensuring that their needs are met, and their financial well-being is preserved.
The RDSP operates with the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB), government incentives to boost savings for eligible individuals.
2. Who Qualifies for an RDSP?
RDSP eligibility is primarily determined by the disability tax credit (DTC), a federal tax credit designed to assist individuals with disabilities. To qualify for an RDSP, you must meet the following criteria:
a) Eligibility for the Disability Tax Credit (DTC):
To open an RDSP, the beneficiary must be eligible for the DTC, typically assessed by a medical practitioner. The DTC is available to individuals with severe and prolonged physical or mental impairments that significantly affect their daily lives, such as speaking, hearing or walking. The impairment must be expected to last one or more years.
b) Age Requirements:
You can open an RDSP for yourself or a family member, such as a child or a sibling, who qualifies for the DTC. There are no age restrictions for beneficiaries; RDSPs can be opened at any stage in life. However, you do need to be less than 60 years of age.
c) Canadian Residency:
To qualify for an RDSP, the beneficiary must be a Canadian resident with a valid social insurance number (SIN). Additionally, contributors to the plan, such as family members or legal guardians, must also be Canadian residents.
3. How to Open an RDSP?
The person opening the RDSP is known as the “holder.” The “beneficiary” is the individual for whom the RDSP has been established and who will receive the money. If the disabled person opening the account has the capacity, they will be the “holder and “beneficiary”.
The holder must be legally authorized to act on behalf of the beneficiary, including a spouse, parent, common-law partner, or formally named representative or guardian.
Opening an RDSP involves several key steps:
a) Obtain the Disability Tax Credit (DTC):
Before opening an RDSP, ensure the beneficiary is eligible for the DTC. The DTC certificate will be required to prove eligibility when applying for an RDSP.
b) Choose a Financial Institution: CC&Associates will find the best one for their clients.
Select a financial institution that offers RDSP services, such as banks, credit unions, or other financial service providers. Each institution may have different account types and investment options to suit your needs. You will need to complete the application, however, CC&Associates does this for all of our clients.
c) If applicable, complete the Grant/Bond application form and the following annex forms.
This is very specific to the individual. Please speak with your financial adviser before completing.
Annex A – Joint Holder Application for Canada Disability Savings Grant and/or Canada Disability Savings Bond (EMP5609)
Annex B – Primary Caregiver Application for Canada Disability Savings Grant and/or Canada Disability Savings Bond (EMP5610)
d) Contribute to the Plan:
RDSP contributions can come from the beneficiary, family members, or friends. The government also provides financial assistance through the CDSG and CDSB, further boosting savings.
e) Develop an Investment Strategy: CC&Associates will help with this.
Work with your chosen financial institution to develop an investment strategy tailored to your financial goals and risk tolerance. This is not something you should do on your own.
f) Start Beneficiary Payments:
The RDSP is intended to provide financial support for the beneficiary's long-term needs. Payments can be made to the beneficiary, and the plan allows for flexibility in how these funds are used.
4. Government Help?
The Canadian government plays a crucial role in supporting RDSPs:
a) Canada Disability Savings Grant (CDSG):
The CDSG matches contributions made to the RDSP by the beneficiary, depending on their family income. Lower-income families can receive a higher matching rate.
b) Canada Disability Savings Bond (CDSB):
The CDSB is available for those with lower or modest incomes, even if no contributions are made to the RDSP. It provides additional financial support to help those in need save for the future.
RDSPs are a valuable tool for individuals with disabilities and their families to secure their financial futures.
To qualify for an RDSP, one must be eligible for the Disability Tax Credit, reside in Canada, and choose a financial institution to set up the plan. Government assistance through the CDSG and CDSB further encourages saving and provides much-needed financial support for those who need it most.
Thanks for reading,
CC&Associates