Registered Disability Savings Plan (RDSP) Rules

The passing of Bill C-47 has ensured that the Canadian Disability Savings Grant (CDSG) and Bond will be carried forward from the inception of the RDSP in 2008. This means that an eligible contribution in 2011 will attract Grant and Canada Disability Savings Bond (CDSB) for the years 2008, 2009, 2010 and 2011. The amount received will depend upon the family income of the beneficiary and the amount contributed. Up to $3 of grant will be available for each dollar contributed to the plan to a maximum of $3500 per year with $10,500 allowed annually for unused entitlements. The Canada Disability Savings Bond adds $1000 annually with $10,000 available each year for unused amounts.

For family incomes less than $81,941 the government will pay CDSG of $3.00 for the first $500 contributed and $2.00 for the remainder to a maximum of $3500 per year. So, a $2000 contribution to a new RDSP in 2011 could attract the $3.00 grant on $500 for each of the carry back years, totaling $6000 of CDSG. For beneficiaries with a family income less than $23,855 the CDSB will add $1000 for each of the 4 years for a total of $4000. That's $10,000 of government money on a $2000 contribution ñ what a great start!

It should be noted that a beneficiary has to be age 49 or under at the time of the claim to be eligible for the CDSG and CDSB. This suggests that a request for retroactive bond or grant by an overage beneficiary will be denied.

Bill C-47 also allows transfers from Registered Pension Plans, RRSPs or RRIFS to the RDSP of a financially dependent child or grandchild. Transfers are included in the lifetime maximum of $200,000 contributed to each plan. This will be a valuable estate planning tool as it will allow a portion of a registered savings plan to be transferred to a lower-income beneficiary instead of having it fully taxable in the year of death. The taxable portion of RDSP payments will include grants, bonds, investment earnings and proceeds of transfers. RDSP income is excluded from calculations of federal government benefits and tax credits. Most provinces exempt RDSP payments from calculations of eligibility for income assistance programs: http://www.hrsdc.gc.ca/eng/disability_issues/disability_savings/rdsp_ptb.shtml

Additional information on Registered Disability Savings Plans is available:

http://www.hrsdc.gc.ca/eng/disability_issues/disability_savings/index.shtml

http://www.cra-arc.gc.ca/E/pub/tg/rc4460/README.html

http://www.cra-arc.gc.ca/rdsp/