REGISTERED DISABILITY SAVING PLAN

Since 2008 the government has introduced a new saving plan for the long term disabled. This plan permits parents to contribute funds to a plan to provide for the future expense of disabled person. Contributions in this plan is not tax deductible to income earner but income from this contribution is not taxable as long as it stays in the plan. Contributions can be made by anyone.   Plan contribution are subject to lifetime limits for $200000 and in addition government makes continuing contributions for low- income families. The grants and bonds can continue up to the end of the year in which the disabled person reaches the age of 59. Private contributions are not refundable. They must be used by beneficiary and at death they go to the beneficiary estate.

An RDSP can get a maximum of $3,500 in matching grants in one year, and up to $70,000 over the beneficiary’s lifetime. A grant can be paid into an RDSP on contributions made to the beneficiary’s RDSP until December 31 of the year the beneficiary turns 49.

The amount of the grant 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:

Amount of CDSG grant when family income is $87,123 or less:

• On the first $500 contribution—$3 grant for every dollar contributed, up to $1,500 a year.
• On the next $1,000 contribution—$2 grant for every dollar contributed, up to $2,000 a year.

Amount of CDSG grant when family income is more than $87,123:

• On the first $1,000 contribution—$1 grant for every dollar contributed, up to $1,000.

Canada disability savings bond
A Canada disability savings bond (bond) is an amount paid by the Government of Canada directly into an RDSP. The Government will pay bonds of up to $1,000 a year to low-income Canadians with disabilities. No contributions have to be made to get the bond. The lifetime bond limit is $20,000. A bond can be paid into an RDSP until the year in which the beneficiary turns 49.

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
• More than $43,561, no bond is paid.

Since 2011, you can carry forward unused grant and bond entitlements to future years. The carry forward period can only start after 2007 and lasts for 10 years. Grants and bonds will be paid on unused entitlements up to an annual maximum of $10,500 for grants and $11,000 for bonds.

Employment and Social Development Canada (ESDC) administers the Canada disability savings grant and the Canada disability savings bond programs. ESDC bases the amount of the grants and bonds that are available for any particular year on the beneficiary’s family income for that year, as well as on matching rates.

If any of the following events occur, all government grants and bonds paid into the plan during the preceding 10 years before the event must be repaid to the Government of Canada. Repayments are required when:

• the RDSP is terminated;
• the plan is deregistered;
• prior to 2014, disability assistance payment (DAP) is made from the plan;
• where a valid election to keep an RDSP open expires and the beneficiary remains ineligible for the DTC;
• prior to 2014, the beneficiary stops being eligible for the DTC; or
• The beneficiary dies.

Since 2011, a beneficiary with a life expectancy of five years or less will be allowed annual RDSP withdrawals of up to $10,000 in taxable plan savings, as well as a pro-rated amount of plan contributions, without having to repay the grant or bonds paid into the plan in the preceding 10 years. These rules only apply when an election to be an SDSP has been filed with the RDSP issuer by the holder of the RDSP and the issuer has notified the Minister of Employment and Social Development Canada (ESDC) of the election.

A new rule will apply for withdrawals made from an RDSP after 2013. This rule replaces the 10-year repayment rule only in respect of RDSP withdrawals. The existing 10-year repayment rule will continue to apply where the RDSP is terminated or deregistered, or the RDSP beneficiary ceases to be eligible for the DTC or dies.

As of 2014, for withdrawals made from an RDSP, the proportional repayment rule will require that, for each $1 withdrawn from an RDSP, $3 of any CDSGs or CDSBs paid into the plan in the 10 years preceding the withdrawal be repaid, up to a maximum of the assistance holdback amount. Repayments will be attributed to CDSGs or CDSBs that make up the assistance holdback amount based on the order in which they were paid into the RDSP, beginning with the oldest amounts.

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