UNDERSTANDING RDSP Registered Disability Savings Plan

[Audio] Understanding R-D-S-P Registered Disability Savings Plan UNDERSTANDING R-D-S-P Registered Disability Savings Plan.

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..

[Audio] Things To Know About Rdsp The beneficiary is the person with the disability who will receive the money in the future. The plan holder is the person who opens and manages the R-D-S-P-. The beneficiary can also be the plan holder. There is no annual limit on contributions but the lifetime contribution limit for a beneficiary is $200000. Contributions can be made to the plan until the beneficiary turns 59. Contributions are not tax deductible, but your savings grow tax free. There is no tax on the investment earnings, as long as they stay in the plan. Until age 49, the beneficiary may be eligible for government contributions to the R-D-S-P under the Canada Disability Savings Grant, and Canada Disability Savings Bond. The beneficiary must start taking regular payments from the plan by age 60..

[Audio] Rdsp Eligibility (beneficiary) To be considered a beneficiary, you must meet the following criteria: Eligible for Disability Tax Credit (D-T-C--) Has a valid social insurance number (S-I-N--) A resident of Canada Under 60 years old since contribution cannot be accepted after the end of the year the beneficiary turns 59.

[Audio] Who Can Be A Plan Holder 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).

[Audio] 2 Factors To Consider In Determining Who Can Be The Plan Holder -Their age -Their contractual competence If the beneficiary is a child The plan holder can be a parent, guardian or any other individual or organization legally authorized to act on behalf of the beneficiary. Examples: tutor, legal representative, public department. If the beneficiary is an adult Beneficiaries who have reached the age of majority must become the holder of their own plan. There are two exceptions to this rule: If the existing plan holder is a parent, the parent can remain as the sole plan holder. Or, the beneficiary and parent can be joint holders. If the beneficiary doesn’t have the legal capacity to manage their own financial affairs, the plan holder must be the party legally authorized to act on behalf of the beneficiary. The beneficiary of an RDSP can also be the plan holder if they are over the age of majority and have the legal capacity to manage their own finances..

[Audio] Rules For Plan Holders There can be more than one plan holder for an R-D-S-P. The plan holder can be changed at any time. If the plan holder is also the beneficiary of the plan, they must be a resident of Canada. If the plan holder is not the beneficiary, they can be a resident of any country. Individual plan holders must have a valid S-I-N If the plan holder is an agency or other institution, it must have a valid business number..

[Audio] 4 Key Points An R-D-S-P can only have one beneficiary. An R-D-S-P can have more than one plan holder. A beneficiary can also be the plan holder. A beneficiary can only have one R-D-S-P..

[Audio] Contributions 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 $200000 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 R-D-S-P..

[Audio] To qualify for C-D-S-G the beneficiary must: Have a valid S-I-N 01 Be a resident of Canada at the time of the contribution 02 Be eligible for the D-T-C 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 $200000 in the R-D-S-P 05.

[Audio] Canada Disability Savings Grant (C-D-S-G-) CDSG is an incentive for individuals to save for the long-term financial future of an R-D-S-P beneficiary Is calculated based on the amount contributed to the R-D-S-P and the beneficiary’s family income Annual limit without carry forward is $3500 Annual limit with carry forward is $10500 Lifetime limit is $70000 To qualify for C-D-S-G the beneficiary must: Have a valid S-I-N Be a resident of Canada at the time of the contribution Be eligible for the D-T-C tax credit Be 49 years old or less as of December 31st in the year the contribution is made Have not contributed more than $200000 in the R-D-S-P.

[Audio] Beneficiary’s Family Income C-D-S-G 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 C-D-S-P system will choose the income level most beneficial for the beneficiary to determine the grant entitlements.

[Audio] Calculation Beneficiary’s Gross Family Income Grant Entitlement Less than or equal to $98040 300% on the first $500 for a maximum payable of $1500 200% on the next $1000 for a maximum payable of $2000 Greater than $98040 or if no income information is available from CRA 100% on the first $1000 for a maximum payable of $1000 Calculate Jared’s C-D-S-G payment and R-D-S-P account total? Jared contributes $1250 into his R-D-S-P Answer? $500 X 300% = $1500.00 Cdsg $750 X 200% = $1500.00 Cdsg CDSG grant is $3000 Account Total is $4250 He has never contributed to an R-D-S-P prior His gross family income is $42000 First $500 only x 300% = $1500.00 C-D-S-G Difference $1250$-$500=750$. $750 x 200% = $1500.00 C-D-S-G.

[Audio] Canada Disability Savings Bond (C-D-S-B-) C-D-S-B helps low and modest-income Canadians with severe and prolonged disabilities and their families save for the future No contribution required to be eligible for C-D-S-B Annual C-D-S-B limit without carry forward is $1000 Annual C-D-S-B limit with carry forward is $11000 Lifetime limit for C-D-S-B is $20000 To qualify for C-D-S-B the beneficiary must: Have a valid S-I-N Be a resident of Canada before the payment of the C-D-S-B Be eligible for the D-T-C tax credit Be 49 years old or less as of December 31st of the year the bond is made payable.

[Audio] Beneficiary’s Family Income C-D-S-B 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 C-D-S-P system will choose the income level most beneficial for the beneficiary to determine the grant entitlements.

[Audio] 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 C-R-A 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.

[Audio] Calculation Calculate Harvey’s C-D-S-B payment Harvey’s gross family income is $35000 Answer? $1000 – ($1000 x ($35000 $32028)/($49020 $32028) = $825.09 C-D-S-B payment He has not received any C-D-S-B payment this year Beneficiary’s Gross Family Income Bond Entitlement Less than or equal to $32028 Maximum annual limit of $1000 Greater than $32028 but less than $49020 Following formula is used: $1000 – ($1000 x (A – B)/(C – B)) A = Family Income B = Lower Threshold (2021: $32028) C = Higher Threshold (2021: $49020) Greater than $49020 or if no income information is available from C-R-A No bond is paid $1000 – ($1000 x ($35000 $32028)/($49020 $32028) = $825.09 C-D-S-B payment.

[Audio] Carrying Forward Unused Cdsg & Cdsb Entitlements It doesn’t matter how long you’ve held the R-D-S-P-. You can open it now, and still claim for grants and bonds going back as far as 2008. You can claim unused grants and bonds up to an annual maximum of: $10500 for grants $11000 for bonds The lifetime limits of $70000 for grants and $20000 for bonds still apply. The grants and bonds will be based on your family income in the year that you are claiming for..

[Audio] Payments The beneficiary will receive Disability Assistance Payments (D-A-P--) or Lifetime Disability Assistance Payments (L-D-A-P-).

[Audio] Disability Assistance Payment (D-A-P--) 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 C-D-S-G and C-D-S-B 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 T-4-A After the D-A-P--, the F-M-V of the R-D-S-P cannot be less than all the government incentives paid in the last 10 years.

[Audio] Lifetime Disability Assistance Payment (L-D-A-P-) Once L-D-A-P payments begin, they must be paid at least annually until the plan is terminated, or the beneficiary dies It includes contributions, earnings, grant and bond Only portions of the C-D-S-G and C-D-S-B which have been in the account for more than 10 years can be withdrawn The portion paid from contributions is non-taxable Any other source will result in a T4A LDAPs are recurring withdrawals made from an R-D-S-P-, payable to the beneficiary L-D-A-Ps 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 F-M-V.

[Audio] Rules Related To Withdrawals Can be requested at any time Must respect payment rules and limits A DAP and L-D-A-P 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 F-M-V of the plan, after the withdrawal, is less than the assistance holdback amount (A-H-A--).

[Audio] Assistance Holdback Amount and Proportional Repayment Rule 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 (A-H-A--) and Proportional Repayment Rule (P-R-R--) must be calculated Issuers must calculate and repay the lesser of these two options: A-H-A is made up of all grant and bond payments that have been paid into the plan within a 10-year period by the government P-R-R requires that $3 be repaid to the government for every $1 withdrawn from the plan up to a maximum of the 10 years A-H-A amount Repayments will be completed in the order in which they were paid into the plan, from oldest to newest.

[Audio] Repayment Example Scenario: An R-D-S-P was opened on February 3rd, 2010 ampere $2500 D-A-P is requested on December 31st, 2020 The A-H-A period is from January 1st, 2010, to December 31st, 2020 The A-H-A amount is equal to $10500 The P-R-R is $2500 times 3 which equals $7500 Since the P-R-R is less than the A-H-A--, only $7500 will be repaid to the government.

[Audio] Primarily Government Assisted Plan (P-G-A-P-) An R-D-S-P is considered as a P-G-A-P if the total of all government incentives is larger than the total private contributions The reverse is true for an R-D-S-P to be considered non-PGAP If the R-D-S-P is P-G-A-P-, a beneficiary between the ages of 27 and 58 can request a payment without the holder’s consent.

[Audio] Tax Consequences 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 R-D-S-P-, and grants and bonds that are withdrawn from the R-D-S-P and that have been in the R-D-S-P for 10 years or more. When you take money out of an R-D-S-P-, you’ll pay tax on any government grants or bonds, and investment earnings, but not on your contributions..

[Audio] Withholding Tax Federal withholding tax Payments above $21805 are subject to the same withholding tax as R-R-S-P withdrawals Provincial withholding tax (Applicable only to Quebec beneficiaries) Withdrawals above $18981 are subject to a 15% withholding tax Excess Payment Federal Provincial (Quebec Only) Quebec Rest of Canada $0 $5000 5% 10% 15% $5000.01 $15000 10% 20% 15% >$15000 15% 30% 15%.

[Audio] When a payment is over the federal threshold then the provincial and federal withholding taxes will apply (Quebec only) Thresholds are indexed annually Payment Amount Provincial Withholding Tax Federal Withholding Tax $18000 N/A N/A $20000 $1019 ($20000 $18981) @ 15% N/A since less than $21805 $23000 $4019 ($23000 $18981) @ 15% $1195 ($23000 $21805) @ 5% $28000 $9019 ($28000 $18981) @ 15% $6195 ($28000 $21805) @ 10%.

[Audio] Transferring To Another Rdsp Funds in one R-D-S-P can be transferred to another R-D-S-P 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 R-D-S-P at a different financial institution. Here’s how it works: All plan holders of the current R-D-S-P must agree to the transfer. All funds in the current R-D-S-P must be transferred to the new R-D-S-P-. 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 R-D-S-P will be considered invalid. Transfer fees may apply. These may vary depending on the financial institutions involved. Transfers to another R-D-S-P are not considered a new contribution, so they won’t affect the lifetime contribution amount of $200000..

[Audio] Closing An Rdsp Account An R-D-S-P is closed when one of the following events occur: The R-D-S-P is voluntary terminated The plan is deregistered The beneficiary ceases to be D-T-C eligible* The beneficiary dies All government incentives must be repaid to the government when the listed events happen.

[Audio] Specified Disability Savings Plan (S-D-S-P-) 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 R-D-S-P Or designate the plan as a S-D-S-P Withdrawals from the S-D-S-P will not trigger a repayment of the A-H-A if the sum of the taxable parts of all withdrawals made in the year does not exceed $10000 Once the designation is made no more contributions can be made The plan will no longer attract any government incentives.

[Audio] Death Of A Holder 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 (in other words 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.

[Audio] Death Of A Beneficiary The R-D-S-P 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 R-D-S-P-, after the repayment to the government, will be paid to the estate..

[Audio] Rdsp At A Glance. 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.

[Audio] Administrative Responsibilities – Who does what? A joint effort between each following organization is necessary to administer Registered Disability Savings Plans (R-D-S-P-); The lists here are in alphabetical order, and reflect each organization’s responsibilities, based on governing legislation..