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RDSPs: helping people with disabilities save

20 January 2020 by National Bank Investments
Men in wheel chair

Registered disability savings plans (RDSP) allow parents or caregivers to ensure the long-term financial security of loved ones living with a disability. Learn about the RDSP’s advantages and how you can maximise your savings.

1. What is an RDSP?

An RDSP is a savings plan from which a person with a disability can withdraw money whenever they need. For example, the amount accumulated in an RDSP can be used to pay for healthcare services or home care assistance.

2. What are the advantages?

Different kinds of savings and investments can be used to contribute to an RDSP, like investment solutions, exchange-traded funds, shares, bonds or deposits. Contributions grow tax-free. Anyone can contribute to an RDSP with the written consent of the account holder.

3. What are these government grants?

RDSPs qualify for two government grants: the Canada Disability Savings Grant (CDSG) and the Canada Disability Savings Bond (CDSB).

CDSGs have yearly and lifetime contribution ceilings, depending on the beneficiary’s family income. You can also carry forward unclaimed credit from previous years.

As for CDSBs, they are available only for low- to modest-income citizens. There is no minimum contribution required; simply opening an RDSP makes you eligible for CDSBs. The bond’s amount depends on the beneficiary’s family income.

4. Who is eligible?

Registered disability savings plans are available only to citizens who are eligible for the disability tax credit (DTC). This is important when opening the RDSP; eligibility will also be verified every year. To be eligible for an RDSP, the person needs to have a valid social insurance number, be a resident in Canada when the plan is started and be under the age of 60. The RDSP’s beneficiary must be the person for whom money is being saved.

5. Who can contribute?

The plan’s holder (or anyone who’s received written permission from the holder) or the person or entity who opens the RDSP and makes contributions on behalf of the beneficiary can contribute. There are three ways to become a holder:

If the beneficiary is over the age of majority and contractually competent, they will become the holder. 

The holder is a person or entity who is legally authorised to act on behalf of the beneficiary if they are over the age of majority but their contractual competency to enter into a plan is in doubt. 

If the beneficiary is a minor, then only their father or mother, or any other entity legally authorised to act on behalf of the beneficiary, may be the holder. When the child reaches the age of majority, the parent or guardian can remain co-holder with the beneficiary once they become an adult.

6. How do you open an RDSP?

To sign up for an RDSP, all eligible clients must go to a financial institution that offers this savings plan. National Bank is recognised as an institution that offers RDSPs and has all the tools and resources to help guide them in the right direction. Though there is no annual contribution limit, make sure you respect the lifetime limit for contributions to an RDSP. The deadline for contributing to an RDSP is December 31 of the year in which the beneficiary turns 59 years old. Money from an RDSP can be withdrawn and used by the beneficiary or withdrawn by the holder and used for the beneficiary.

7. How do you maximize an RDSP?

The earlier your client start contributing, the more they will benefit from this plan’s advantages, including the bonds and grants. To start putting money away hassle-free, set up automatic transfers through a systematic savings plan.

Legal disclaimers

The information and the data supplied in the present document, including those supplied by third parties, are considered accurate at the time of their publishing and were obtained from sources which we considered reliable. We reserve the right to modify them without advance notice. This information and data are supplied as informative content only. No representation or guarantee, explicit or implicit, is made as for the exactness, the quality and the complete character of this information and these data. The opinions expressed are not to be construed as solicitation or offer to buy or sell shares mentioned herein and should not be considered as recommendations.

National Bank Investments is a member of Canada’s Responsible Investment Association and a signatory of the United Nations-supported Principles for Responsible Investment.

©National Bank Investments Inc. All rights reserved. Reproduction in whole or in part is strictly prohibited without the prior written authorization of National Bank Investments Inc.

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