UNDERSTANDING RDSP Registered Disability Savings Plan

[image] wtrn CTF MEMBER. UNDERSTANDING RDSP Registered Disability Savings Plan.

Itr»oooua. What is an RDSP?. Introduced in 2008 A Registered Disability Savings Plan (RDSP) is a long-term savings plan that is intended to help parents and others to save for the long-term financial security of a person who is eligible for the Disability Tax Credit (DTC). To help savings grow, the Government of Canada will deposit the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB) into the RDSP of eligible beneficiaries. The beneficiary of an RDSP can continue to receive federal and provincial disability benefits..

Itr»oooua. THINGS TO KNOW ABOUT RDSP. [image] Did you know? persons with disabilities aged 049 With an ROSP can get up to in bonds and up to in grants from the Government Of Canada To mor. about m. ROSP, pleas. visit: or can: 18M o-cmada (1-8004224232b. TO ahm*• fMrn*s. I-no-G22.G232. By teletypewriter can 1400-926-9105..

Itr»oooua. RDSP ELIGIBILITY (BENEFICIARY) To be considered a beneficiary, you must meet the following criteria: Eligible for Disability Tax Credit (DTC) Has a valid social insurance number (SIN) A resident of Canada Under 60 years old since contribution cannot be accepted after the end of the year the beneficiary turns 59.

WHO CAN BE A PLAN HOLDER. Itr»oooua. The rules for plan holders depend on whether the beneficiary is a child under the age of majority or an adult. In Ontario, the age of majority is 18. They can be: The beneficiary Beneficiary’s legal parent(s) Legal representative (guardian, tutor, curator, public department, agency, or institution) A qualifying family member (legal parents, spouse, or common-law partner only).

Itr»oooua. 2 FACTORS TO CONSIDER IN DETERMINING WHO CAN BE THE PLAN HOLDER -Their age -Their contractual competence.

Itr»oooua. RULES FOR PLAN HOLDERS. KN0WTHE RULES !.

4 KEY POINTS. Itr»oooua. An RDSP can only have one beneficiary. An RDSP can have more than one plan holder. A beneficiary can also be the plan holder. A beneficiary can only have one RDSP..

CONTRIBUTIONS. Itr»oooua. No annual contribution limit. You can make lump-sum contributions or set up regular payments to be taken from your bank account. Lifetime limit is $200,000 Contributions are permitted until December 31st in the year in which the beneficiary turns 59 years old Contributions belong to the beneficiary It is possible to carry forward government incentives If you are not the plan holder, you must have written permission from the plan holder to contribute to an RDSP..

Have a valid SIN 01 Be a resident of Canada at the time of the contribution 02 Be eligible for the DTC tax credit 03 Be 49 years old or less as of December 31st in the year the contribution is made 04 Have not contributed more than $200,000 in the RDSP 05.

CDSG is an incentive for individuals to save for the long-term financial future of an RDSP beneficiary Is calculated based on the amount contributed to the RDSP and the beneficiary’s family income Annual limit without carry forward is $3,500 Annual limit with carry forward is $10,500 Lifetime limit is $70,000.

Itr»oooua. BENEFICIARY’S FAMILY INCOME CDSG. Calculation of the beneficiary’s family income depends on the beneficiary’s age. For beneficiaries 19 and over, annual family income refers to the beneficiary’s net income plus that of their spouse or common-law partner. For beneficiaries 18 and below, the beneficiary’s family income is based on the gross family income of the eligible individual who receives the Canada Child Benefit An eligible individual is the parent of the child who fulfills the responsibility for the care of the child It can be a shared custody parent, this way the CDSP system will choose the income level most beneficial for the beneficiary to determine the grant entitlements.

Calculate Jared’s CDSG payment and RDSP account total? Jared contributes $1,250 into his RDSP Answer? $500 x 300% = $1,500.00 CDSG $750 x 200% = $1,500.00 CDSG CDSG grant is $3,000 Account Total is $4,250 He has never contributed to an RDSP prior His gross family income is $42,000.

Itr»oooua. Canada Disability Savings Bond (CDSB).

Itr»oooua. BENEFICIARY’S FAMILY INCOME CDSB. Calculation of the beneficiary’s family income depends on the beneficiary’s age. For beneficiaries age 19 and over, annual family income refers to the beneficiary’s net income plus that of their spouse or common-law partner. For beneficiaries 18 and below, the beneficiary’s family income is based on the gross family income of the eligible individual who receives the Canada Child Benefit An eligible individual is the parent of the child who fulfills the responsibility for the care of the child It can be a shared custody parent, this way the CDSP system will choose the income level most beneficial for the beneficiary to determine the grant entitlements.

Itr»oooua. BENEFICIARY’S FAMILY INCOME CDSB. When the beneficiary turns 18 and over (competent or not contractually competent) the beneficiary’s family income is based on their income, including the spouse’s income To determine family income an income tax return must be filed CRA uses income data of the second preceding tax year to establish a grant rate For example, the tax rate used for a contribution made in January 2018 will be from the 2016 tax income return.

Calculate Harvey’s CDSB payment Harvey’s gross family income is $35,000 Answer? $1,000 – ($1,000 x ($35,000 - $32,028)/($49,020 - $32,028) = $825.09 CDSB payment He has not received any CDSB payment this year.

Itr»oooua. CARRYING FORWARD UNUSED CDSG & CDSB ENTITLEMENTS.

Itr»oooua. The beneficiary will receive - Disability Assistance Payments (DAP) or Lifetime Disability Assistance Payments (LDAP).

Itr»oooua. A DAP is a discretionary payment that can be made at any time to a beneficiary A DAP is requested by the holder of the account It includes contributions, earnings, grant, and bond Only portions of the CDSG and CDSB which have been in the account for more than 10 years can be withdrawn The portion paid from contributions is non-taxable Any other sources will result in a T4A After the DAP, the FMV of the RDSP cannot be less than all the government incentives paid in the last 10 years.

Itr»oooua. LDAPs are recurring withdrawals made from an RDSP, payable to the beneficiary LDAPs can start at any time but must begin by the end of the year in which the beneficiary turns 60 Payments will be subject to annual maximum withdrawal limit based on a legislative formula involving: Life expectancy Age FMV.

Itr»oooua. Can be requested at any time Must respect payment rules and limits A DAP and LDAP can be paid at the same time Repayment rules may apply The beneficiary does not need to be a resident of Canada to receive a payment A withdrawal cannot be made if the FMV of the plan, after the withdrawal, is less than the assistance holdback amount (AHA).

Itr»oooua. If it has not been 10 years since the last incentive was paid into the plan, a withdrawal will trigger a repayment of the incentives Both the Assistance Holdback Amount (AHA) and Proportional Repayment Rule (PRR) must be calculated Issuers must calculate and repay the lesser of these two options: AHA is made up of all grant and bond payments that have been paid into the plan within a 10-year period by the government PRR requires that $3 be repaid to the government for every $1 withdrawn from the plan up to a maximum of the 10 years AHA amount Repayments will be completed in the order in which they were paid into the plan, from oldest to newest.

Scenario: An RDSP was opened on February 3rd, 2010 A $2,500 DAP is requested on December 31st, 2020 The AHA period is from January 1st, 2010, to December 31st, 2020 The AHA amount is equal to $10,500 The PRR is $2,500 times 3 which equals $7,500 Since the PRR is less than the AHA, only $7,500 will be repaid to the government.

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Itr»oooua. The beneficiary doesn’t pay tax on the original contributions that are withdrawn from the RDSP. The beneficiary will pay tax on: investment earnings that are withdrawn from the RDSP, and grants and bonds that are withdrawn from the RDSP and that have been in the RDSP for 10 years or more. When you take money out of an RDSP, you’ll pay tax on any government grants or bonds, and investment earnings, but not on your contributions..

Excess Payment Federal Provincial (Quebec Only) Quebec Rest of Canada $0 - $5,000 5% 10% 15% $5,000.01 - $15,000 10% 20% 15% >$15,000 15% 30% 15%.

Payment Amount Provincial Withholding Tax Federal Withholding Tax $18,000 N/A N/A $20,000 $1,019 ($20,000 - $18,981) @ 15% N/A since less than $21,805 $23,000 $4,019 ($23,000 - $18,981) @ 15% $1,195 ($23,000 - $21,805) @ 5% $28,000 $9,019 ($28,000 - $18,981) @ 15% $6,195 ($28,000 - $21,805) @ 10%.

Itr»oooua. Funds in one RDSP can be transferred to another RDSP as long as both plans have the same beneficiary. For instance, a beneficiary about to reach the age of majority may want to open up a new RDSP at a different financial institution. Here’s how it works: All plan holders of the current RDSP must agree to the transfer. All funds in the current RDSP must be transferred to the new RDSP. The transfer must be completed within 120 days after the new RDSP contract is signed. If the funds are not transferred on time, the new RDSP will be considered invalid. Transfer fees may apply. These may vary depending on the financial institutions involved. Transfers to another RDSP are not considered a new contribution, so they won’t affect the lifetime contribution amount of $200,000..

Itr»oooua. An RDSP is closed when one of the following events occur: The RDSP is voluntary terminated The plan is deregistered The beneficiary ceases to be DTC eligible* The beneficiary dies All government incentives must be repaid to the government when the listed events happen.

Itr»oooua. When a doctor certifies in writing that the beneficiary has less than 5 years life expectancy, they must choose an option: Keep the plan as RDSP Or designate the plan as a SDSP Withdrawals from the SDSP will not trigger a repayment of the AHA if the sum of the taxable parts of all withdrawals made in the year does not exceed $10,000 Once the designation is made no more contributions can be made The plan will no longer attract any government incentives.

Itr»oooua. On the passing of a holder, they must be removed from the plan. In such cases, the following may be added as a successor holder: The beneficiary (If they are contractually competent and of the age of majority) The holder’s estate Any other person who is already the holder (i.e. joint account) A legal parent of the beneficiary that was a previous holder of the plan A qualifying person at the time the rights were acquired.

Itr»oooua. The RDSP must close and everything remaining in the plan must be paid out to the beneficiary’s estate. The plan must be terminated by December 31st following the calendar year in which the beneficiary passes. Any funds which remain in the RDSP, after the repayment to the government, will be paid to the estate..

Only one RDS P per beneficiary All funds in the plan are intended to be used solely for the beneficiary Open i n g an RDSP Residency criteria Valid Social (SIN) required The beneficiary must be eligible for the Disability Tax Credit (DTC) Last day Of e ligibility Based on the family income Based on contributions Amounts paid lifetin-•e Ii•nit Contributions s200. ooo CDSG 49 $97 ,069• : a 300% matching Of to 200% i' > "7.069* if n iS available; a 100% rate iS the first s 1.0m or less or S70.ooo CDSB 49 $31,711•: Sl.ooo_ S31.711• but S S48,535•: the C*saWjry Act result. S20.ooo.

CRA CanMa Revenue Registered Plans Directorate (RPD) reviews contribution , rolover and rules Disabilty Tax credit (DTC) payrnent rules for the disabdity' assastance payment (DAP) and the lifetime disability assistance payment (L DAP) plan registrathn and cbsure and amendment proposals Rosp eligibility criteria for holders and beneficiarés qualif•d investrnents an Specif•d DisatAity Savings Plan (SOSP) electøn specirnen plan conütions Benefit Program Directorate (BPD) OTC eligibiMy fanuly ESDC t Social t C an ada (COSG) ICOSB) Ad C COSA' Canada Education Savings Program (CESPI annual statement of grant amount (AHA) and repayment •4 beneficiary eligibility the CDSG and the CDSB •J carry mard rules and calculation CDSG and CDSB system testing and monitoring •J issuer and agent enrolment payment of the COSG and COSB •J processhg of transactions prowde data to issuer after a successful transfer trainng reference Office for Disability Issues (O DIJ interpretatm of the COSA and the amendment Ssuer agreement •Z outreach strategies (promotional and communication activities) •4 prowam polo and turns Social Insurance Registration Office (SIR) valdation Of the benefcairy and holder Social Insurance Number (SIN) Financial organizations ot administer contributions. rolbvers an d transfers certity accuracy of informaton corn*te form the CDSG and the CDSB en sure System With the Interlace Transaction Standards (ITS) make payments from ROSP to beneficiaries provide ROSP statement of receive and deposit the CDSG and CDSB into the Rosp sign the issuer agreement wth submi electronic transactions to submi the specimen plan to the CRA for ultimately responsible for the administration Of the RDSP verity the plan regsitrabon status sign an awe-ement with eve administer the ROSP on behalf of Service provider sign an aweement with me issuer.