The RDSP is a registered savings plan introduced by the Government of Canada to help families save for the long-term financial security of persons with severe disabilities who are eligible for the Disability Tax Credit (DTC).
You qualify for the DTC when you have a marked physical or mental limitation. This means that you have a disability related to your ability to speak, hear, walk, evacuate (bowel or bladder), feed yourself, dress yourself, or mental functions necessary for activities of daily living.
1. Be eligible for the Disability Tax Credit;
2. Be between the ages of 0 and 59;
3. Have a valid social insurance number;
4. Be a resident of Canada.
A person is eligible for the DTC in a given year if they have a severe and prolonged impairment in physical or mental functions. To qualify for the credit, Form T2201 - Disability Tax Credit Certificate must be completed by a qualified practitioner and sent to the Canada Revenue Agency for approval.
Individuals who wish to establish an RDSP but have not yet claimed the DTC must be eligible for the DTC before establishing an RDSP. Learn more about the Disability Tax Credit click here
Fill out our online form to begin the opening process.
Afterwards, one of our representatives will contact you to answer your questions and complete the opening of your RDSP.
Once the RDSP is established, you can deposit money into the account at any time.
The overall lifetime Contribution limit for a Beneficiary is $200,000. There is no limit on annual Contributions and the full $200,000 can be made in any one year.
Contributions are not tax-deductible, but the investment earnings are tax-deferred as long as they are held in the Plan.
Contributions must stop at the end of the year in which the RDSP beneficiary turns 59.
Once the RDSP is set up with a reei.ca representative, you can contact us directly to contribute to the account.
It is also possible to set up a pre-authorized payment which consists of automatically contributing a certain amount on a periodic basis.
You may be eligible for Canada Disability Savings Bonds if your net annual income is less than $49,020. These bonds will be deposited into your RDSP.
To supplement individual savings, the federal government offers the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB).
The RDSP entitles the beneficiary to CDSGs and CDSBs until December 31 of the year in which the beneficiary turns 49.
CDSGs are matching contributions that the government deposits into the beneficiary's RDSP to help build savings. The government provides matching contributions of up to 300%, based on the amount contributed and net family income.
For a beneficiary who is a minor, the net family income is that of his/her parents. When the beneficiary has reached the age of majority, the net family income is that of the beneficiary and his/her spouse, if any. The income threshold is indexed annually for inflation.
Low-income families are also eligible for a Canada Disability Savings Bond (CDSB). The government deposits up to $1,000 per year into the RDSP of a low-income beneficiary. No contributions required!
CDSB payments are subject to a lifetime limit of $20,000 per beneficiary and are available until the end of the year in which the beneficiary turns 49, as long as the beneficiary remains a resident of Canada.
For a beneficiary who is a minor, the net family income is that of his/her parents. When the beneficiary has reached the age of majority, the net family income is that of the beneficiary and his/her spouse.
CDSGs are capped at $70,000 per beneficiary and are available until the end of the year in which the beneficiary turns 49, as long as the beneficiary remains a resident of Canada.
Since there is no limit on annual contributions to an RDSP, up to $200,000 can be contributed in a single year. However, contributing the full amount allowed at one time will result in the loss of the CDSG in subsequent years. Individuals who intend to contribute to an RDSP should consult with an expert advisor at reei.ca to determine whether a large lump sum contribution or periodic contributions are more appropriate. Depending on expected rates of return, the age of the RDSP beneficiary and anticipated cash flow needs, smaller annual contributions may be more appropriate. Making a large contribution all at once provides a longer period of tax-sheltered growth, while making contributions over several years provides greater benefit from the CDSG.
Eligible investments for RDSPs are generally the same as for Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) and include cash, securities, bonds, GICs, mutual funds and various other investments.
There are two types of RDSP withdrawals:
1. Lifetime Disability Payments (LTD) - These are annual recurring payments that continue until the beneficiary dies. Payments can begin at any age, but must begin before the end of the year in which the beneficiary turns 60.
2. Disability Assistance Payments (DAP) - These are periodic lump sum payments that can be made to the beneficiary at any time after the RDSP is established.
Upon the death of an RDSP beneficiary, the plan must be wound up by December 31 of the following year. Grants and bonds paid in the previous 10 years will be repaid to the government. Growth income, grants and bonds are taxable in the hands of the Beneficiary's estate. Initial Contributions are tax-free.
In the event that the Beneficiary is no longer eligible for the DTC, the Grants and Bonds will remain in the Account. The RDSP will remain active, but no new contributions can be made to the account and the account will not be eligible for grants or bonds or carry forward grants and bonds.
REEI.ca is committed to ensuring that people with disabilities have access to financial products and services that respect their independence.
To accomplish this, we chose Emma Life Insurance to reduce the barriers that can prevent people with disabilities from purchasing life insurance. Their services are completely online and their health questionnaire is among the most inclusive in Canada.
