BUDGET 2012: CHANGES TO THE RDSP QUESTIONS & ANSWERS

Please click on the following link to see a brief overview of announced Budget 2012 enhancements to the RDSP, the grant and the bond: BUDGET 2012_Qs & As_EN_Final July 2012

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Also copied here:

  • Plan Holders

The Budget announced the Government of Canada’s commitment to work with provinces and territories to develop standardized, streamlined processes that provinces and territories could adopt in order to facilitate and simplify the process of opening RDSPs for adult beneficiaries who lack contractual competence. In the interim, while these processes are being developed, the Government of Canada has temporarily expanded the definition of who may be the plan holder of an RDSP. Until the end of 2016, a beneficiary’s spouse, common-law partner or parent will be able to become the plan holder and open the RDSP on behalf of an adult beneficiary who might not be able to open a plan due to concerns about their ability to enter into a contract. These temporary rules are intended to afford provinces and territories sufficient time to develop long-term solutions to address RDSP legal representation issues. This interim measure came into effect as of June 29, 2012 when Bill C-38 received Royal Assent.

1. Q. Who can open an RDSP and be the holder for a beneficiary who is not contractually competent and has reached the age of majority?

A. In addition to the existing legislation in effect, the beneficiary’s parent(s), spouse or common-law partner.

2. Q.Whenwillthisnewruletakeeffect?

A. The enabling legislation (Bill C-38) was passed as of June 29, 2012.

3. Q. How long will this measure be in effect?

A. This is a temporary measure and will end on December 31, 2016.

4. Q. If a parent, spouse or common-law partner becomes the holder under this temporary measure, what happens on January 1, 2017?

A. A holder named to an RDSP contract under this measure will be able to remain the holder after 2016.

5. Q. What happens if a legal representative is appointed for the beneficiary after a qualifying family member has opened an RDSP for the beneficiary?

A. The legal representative will replace the qualifying family member as plan holder and the current holder would have to be removed.

6. Q. What happens if a beneficiary becomes contractually competent after a qualifying family member has opened an RDSP for the beneficiary?

A. The beneficiary may be added as a plan holder or become the sole plan holder. The qualifying family member may remain as a holder or be removed altogether.

  • Proportional Repayment Rules

Currently, all grant and bond paid into an RDSP in the previous 10 years must be repaid to the Government of Canada when any of the following events occur:

-There is a withdrawal from the RDSP The RDSP is deregistered or closed

-The beneficiary is no longer eligible for the Disability Tax Credit (DTC)

-The beneficiary dies

This ten-year amount to be repaid is known as the Assistance Holdback Amount (AHA). To allow beneficiaries greater access to their funds when necessary, while respecting the objective of long-term savings, a proportional repayment rule will be introduced for withdrawals only. The ten-year AHA will remain in place for all other situations identified above.

The new proportional repayment provision will require that $3 be repaid to the Government of Canada for every $1 that is withdrawn, up to a maximum of the ten-year AHA amount. Repayments to the Government of Canada will be attributed in the order in which grants and bonds were paid into the plan, from the oldest to the newest. This new measure will take effect after 2013 and apply to withdrawals made after that time.

1. Q. If a beneficiary withdraws $5,000, how much AHA needs to be repaid?

A. Issuers would repay to the Government of Canada either $15,000, (3 x $5000) or the total amount of AHA that is in the plan at the time, whichever is less.

2. Q. When does this new measure take effect?

A. Legislation will need to be tabled in Parliament in order to make this change, and to determine a coming-into-force date. If the legislation is passed within the current calendar year, this new measure could come into effect as early as January 1, 2014.

  • Maximum and Minimum Withdrawals

There are two types of withdrawals that can be made from an RDSP:

 Disability Assistance Payments (DAPs)

 Lifetime Disability Assistance Payments (LDAPs).

DAPs are discretionary payments that can be made at any time (if the plan allows DAPS – currently, all financial organizations allow DAPs), and LDAPs, once started are annual payments that continue until the beneficiary dies or the plan is depleted of funds and closed.

The Income Tax Act (ITA) specifies through the use of a formula how much can be withdrawn from a plan during a calendar year, depending on the composition of the funds held in the plan on January 1st of that year. An RDSP may contain more Government of Canada assistance than private contributions. If so, it is considered a Primarily Government Assisted Plan (PGAP). When the amount of private contributions is greater than the amount of grant and bond held in the RDSP, it is considered non- PGAP.

Withdrawal limits (i.e. DAPs or LDAPs) are calculated depending upon the proportion of private versus government contributions held in the RDSP. PGAPs are currently limited in the amount of money that can be withdrawn in a given year, while non-PGAPs have no limitations whatsoever. Budget 2012 announced measures to provide greater flexibility to make withdrawals from PGAPs by increasing the annual maximum withdrawal limit that applies to these plans, and ensuring that RDSP assets are used to support a beneficiary during their lifetime by requiring a minimum amount to be withdrawn from all RDSPs beginning the year a beneficiary attains 60 years of age. This new measure will take effect after 2013. The following table outlines the old rules and the new rules:

EXAMPLE

In 2008, Katie is 10 years old, and has an RDSP opened on her behalf. Katie and

her family contribute $1,500 each year, and receive the annual maximum grant

($3,500) and annual maximum bond ($1,000) each year.* Once the lifetime limits of

the grant ($70,000) and bond ($20,000) have been reached, Katie’s family stops

making contributions. When Katie reaches 45 years old, government contributions

will exceed private contributions making her RDSP worth $412,450 (assuming the

interest earned is 5% annually).

If Katie would like to make a DAP at the age of 45, under the current rules, she would only be able to withdraw $10,854 in that calendar year.

$412,450/ (80 + 3 – 45) = $10,854.

Under the new rules, Katie will be able to withdraw the amount determined by the formula or 10% of the total assets. Therefore, up to $41,245 may be withdrawn in the calendar year.

* In this example, Katie’s family income qualifies her to receive the full bond each and every year.


1. Q. Will this change the DAP/LDAP formula?

A. The DAP/LDAP formula remains unchanged.

2. Q. When do these rules take effect?

A. Legislation will need to be tabled in Parliament in order to make this change, and to determine a coming-into-force date. If the legislation is passed within the current calendar year, this new measure could come into effect as early as January 1, 2014.

3. Q. Does this new rule have an impact on the shortened life expectancy measure?

A. No. The shortened life expectancy measure remains the same.

  • Rollover of Registered Education Savings Plan (RESP) Investment Income

To provide greater flexibility for parents of a child with a disability, if certain conditions are met, any earnings in a Registered Education Savings Plan (RESP) will be eligible to be rolled-over into an RDSP without incurring any tax implications if the plans share a common beneficiary.

To be eligible to rollover the income from an RESP to an RDSP, the beneficiary must meet age and residency requirements with respect to RDSP rules. As well, one of the three following conditions must be met:

 The beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent the beneficiary from pursuing post-secondary education;

 The RESP account has been in existence for at least 10 years and each beneficiary is at least 21 years of age and is not pursuing post-secondary education;

 The RESP has been in existence for more than 35 years.

The income portion of the RESP will be considered a contribution, but will not be eligible to attract the Canada Disability Savings Grant. The amount “rolled-over” cannot cause the RDSP to exceed the $200,000 limit of total contributions, and will use available contribution room. The rolled-over amount will be a taxable portion of any Disability Assistance Payment (DAP) or Lifetime Disability Assistance payment (LDAP), and will be used to determine if the plan is a Primarily Government Assisted Plan (PGAP) with respect to withdrawals, (refer to item “Maximum and Minimum Withdrawals” above for a description of these terms). This new measure will take effect after 2013.

1. Q. Can I roll-over contributions made to an RESP?

A. Contributions made to an RESP belong to the subscriber and are returned to them when the plan is closed. It is up to that individual to decide what to do with those funds, but that individual could choose to put them into an RDSP.

2. Q. Can I roll-over the Canada Education Savings Grant (CESG)?

A. No. Any unused CESG remaining in the RESP is to be repaid to the Government

of Canada.

3. Q. When does this new measure take effect?

A. Legislation will need to be tabled in Parliament in order to make this change, and to determine a coming-into-force date. If the legislation is passed within the current calendar year, this new measure could come into effect as early as January 1, 2014.

  • Termination of an RDSP following Cessation of Eligibility for the Disability Tax Credit (DTC)

In certain circumstances, an RDSP will be allowed to remain open, but “dormant” for a period of up to five years when a beneficiary ceases to be Disability Tax Credit (DTC) eligible, if there is a likelihood that the beneficiary will again qualify for the DTC. If this is the case, the holder must make an “election” whereby a medical practitioner must certify in writing that the nature of the beneficiary’s condition will make the beneficiary eligible for the DTC in the foreseeable future. If so, the plan can remain open, however no additional contributions can be made to the plan during this period, no grant or bond will be paid to the plan, and no grant or bond entitlements will be accumulated. The Assistance Holdback Amount (AHA) will remain the amount as at cessation of DTC eligibility, and the new proportional repayment rule will also apply. This new measure will take effect after 2013.

1. Q. When does the “election” have to be made?

A. The election must be made by December 31 of the year following the year in which the beneficiary is no longer eligible for the DTC.

2. Q. How long can the plan remain open under “election”?

A. The plan must be closed by the end of the fourth year following the year in which the beneficiary is no longer eligible for the DTC, if the beneficiary remains DTC ineligible.

3. Q. When will this new measure take effect?

A. Legislation will need to be tabled in Parliament in order to make this change, and to determine a coming-into-force date. If the legislation is passed within the current calendar year, this new measure could come into effect as early as January 1, 2014.

55 Responses to “Federal Government Releases Q&A Sheet on RDSP Changes”

  1. Linda

    I have started a disability savings for my 12 year old daughter, it has been 4 years, I was told that she could withdrawal whatever she needs after the 10th year, is this correct?

    Reply
    • Nicola Dunne

      Hello Linda,

      You can make a withdrawal at any time, however, you should consider the 10 year rule, regarding the total amount that the federal government has contributed to an RDSP in the preceding ten years.

      The 10 year rule means for each $1 withdrawn from an RDSP, $3 of any grants or bonds paid into the plan in the past 10 years must be repaid.

      You may also wish to consider what your goal is for your daughter’s RDSP, as it’s a long-term saving plan. You can use this RDSP calculator to project the estimated future value of your daughter’s RDSP: http://www.rdsp.com/calculator/

      Nicola

      Reply
  2. Andrew

    I am working with a client whose daughter (2 years old) was diagnosed with type I diabetes. According to CRA, she is eligible for the DTC until she is 18. At which time, as an adult, type I diabetes is not considered a disability eligible for DTC. If we are contributing funds into this account but we know, if all else is equal in the future, that she will not qualify for DTC when she is 18, should we contribute to age 8 or 9 and then not contribute again, because we know that the grant and bond will get clawed back considering she will have to withdraw or rollover this RDSP at age 19? I’m assuming she will get to keep as much grant and bond they can accumulate between now and age 8 or 9 considering it’ll be beyond 10 years from when they withdraw or wrap up the plan. Correct?

    Reply
    • Nicola Dunne

      Hello Andrew,
      If your clients has been told by CRA that their daughter will no longer be eligible after 18, her RDSP will be closed and all government contributions received (grants and bonds) in the 10 years prior will have to be repaid.

      You can do as you have suggested and only contribute until the client’s daughter is 8. She would keep their contributions, the grants and bonds as well as any income/interest earned on both the families contribution and the government grants and bonds.

      Your clients could also continue to contribute up until their child is deemed ineligible for the DTC by CRA. This would provide an opportunity to continue to increase savings and earn interest on all funds held in the RDSP.

      Other questions that might provide further opportunities for this family:

      Did your client’s daughter disability diagnosis start at birth? If so, has the client applied for grants and bonds going back to birth? Individuals are able to apply for grant and bond up to 10 years prior (or to the beginning of the program in 2008) or to the date of their diagnosis.

      Is your client in BC? and if so, do they receive the Federal Child Disability Benefit? If so, they could be eligible for the Endowment 150 grant. For more information and application, please go to: http://www.rdsp.com/endowment-150/

      If your client has any further questions, they can contact our Disability Planning Helpline 1-844-311-7526 or email: rdsp@planinstitute.ca

      Reply
  3. Peter m Clarke

    We helped our 40 year old Foster daughter establish an RDSP ,backdated to 2008 when she qualifed for a DTC…the account was opened with $12,000 but we now find the maximum annual available grant is only $10,500, meaning she appearently forgoes the grant she would have qualified for if it was done year by year…..NOBODY at BMO told us we should have only done it 3 years at a time in order to get the maximum grant…

    Reply
    • bronwyn

      Hi Peter, I have briefly discussed your posts with one of our RDSP volunteers. His reaction was that it appears your daughter is now 48 so you have 2 years to take whatever action is possible. No money will go in from the government after the calendar year in which your daughter turns 49.
      He suggests that it will be worth your time to discuss this one more time with a BMO representative. He knows that BMO has a special unit at their head office that deals specifically with RDSPs and that all of their representatives are encouraged to phone them for detailed instructions. Make sure that the representative makes a phone call to that special department to clarify your situation.

      Reply
  4. DOUG MILLIGAN

    Steph is 35, I just applied for an RDSP, she will be receiving an inheritance, how much can she put into her RDSP. she has a DTC since 2006.
    thanks
    DOUG

    Reply
    • Adam

      Hi Doug. Sorry for the delay in responding to your question. We’ve developed an online calculator to help answer questions like these. Here’s the link: http://www.rdsp.com/calculator. Please try it out, and if you have any questions, don’t hesitate to call our toll free helpline at 1-844-311-7526. Thank you for getting in touch.

      Reply
  5. JP

    What sort of accessibility provisions are there available for RDSP holders when they encounter health crises? I just opened my RDSP in Dec 2015, it was backdated to 2008 for my eligibility with bonds. I am on Income Assistance provisions and I require immediate dental care and have no real way of paying for it.

    Is there a way to dip into my RDSP without triggering the payback of $3 for every $1 taken out, and if not – how does a person that is with a disability pay that back?

    Reply
    • Adam

      Hi JP – you can dip into that money, but you will trigger some clawing back of government contributions. We’d be happy to discuss this with you on the phone. Please feel free to call us on 1-844-311-7526. Thanks so much.

      Reply
  6. victor

    when can the rdsp be back dated till? from date of injury or date of handicap tag issued or recieved, and how do you get this date? Thank you for your time and help.

    Reply
    • Adam

      Hi Victor. If you want to retroactively benefit from the RDSP, you’d need to have been eligible for the DTC for the period you wish to claim.

      You can request that a prior year be reassessed for the Disability Tax Credit if Form T2201 was signed to certify that the impairment started in an earlier year. To claim a tax credit for a previous year already assessed by the CRA, you should send a request for a T1 return adjustment your tax centre. We’d encourage you to contact CRA directly for clarification on which supporting documents could be required. You are also welcome to call our toll free Helpline at 1-844-311-7526 to discuss your situation further. Thanks for reaching out.

      Reply
  7. Wanda

    Hello, I am almost 59, this is my last year to open an RDSP. My husband passed away a few years back and I recently found out I am entitled to some pension money. It is not a lot of money. I waived on the reduced lump payment, which is reduced 55%, and have decided to take the backdated retro, and a small monthy payment for 5 years, at which point i can take the holdback amount and continue to receive the small monthly payment, about 100.00 something to that effect. It is currently in an RPP. If i put it in an RRSP and withdraw some money, which i need to do, do I lose my contribution room on the RRSP? If i transfer it to an RDSP and then withdraw, would that be better. I would leave most in either plan, but do need the RRSP room when i am 64 for the holdback amount. I would receive a pension income slip every year for taxes, but i desperately need to keep my Provincial Benefits, i am very low income.

    Reply
    • Adam

      Hi Wanda – We can’t provide you advice on managing your RRSP. I would strongly encourage you to speak with a financial advisor to make the best decisions about your retirement savings. It’s not possible to transfer money from an RRSP to an RDSP. The only circumstances where RRSP funds can be deposited in an RDSP is if you’re the parent or grandparent of a dependent child/grandchild with a disability. Thank you very much for reaching out.

      Reply
  8. Gabriel

    I am disabled for the reason of kidneys’ failure. I’ve opened RDSP and got $7.000 of the government bond for the previous years. I am not planning to contribute my own money, because I live below the poverty line and can not work. Now, all I know is that RDSP absolutely worthless thing, I’ve tried to withdraw any amount from it, using help of my Social Workers, my Members of Parliament, they were contacting both Canada Revenue and TD Waterhouse. And zero outcome. And if I will get a kidney’s transplant in a few years, these money will disappear. I didn’t know anything about this account and bank clerk lied to me about it. But now I only have more stress and suffering, knowing at those hard times that I have money on my account but I am not able to get them. RDSP is a biggest government scam, it helps investment companies, not us, regular disabled people.

    Reply
    • Adam

      Hi Gabriel. Thank you for reaching out to us. I’m really sorry that you’re feeling so stressed. Can you tell me the year you opened your RDSP? Once I have that information, I’ll be able to respond to the issues you raised.

      Reply
  9. Taylor

    Hi there,

    Kind of an odd question for you guys:

    I opened my RDSP in 2014 (when I was 24) and immediately began saving as much as I could in order to maximize contributions from the government. What I didn’t realize at the time was that there was a yearly maximum of $10,500 in contributions from the CDSG. I deposited an extra $1400 into the account before realizing that I was maxed out for the year. I now invest according to the letter of entitlement I receive from the CRA at the beginning of the year, but I’m wondering if I’m able to just withdraw the $1400 that wasn’t met with contributions (after I turn 27), and reinvest it in a future year. Or are withdrawals always considered a mixture of private, goverment, and growth contributions?

    Thank you,
    Taylor

    Reply
    • Helene Eschbach

      Hi Taylor,
      Yes, every $1 that you withdraw will mean that you have to pay back $3 to the government. From now on check your Annual Statement of Entitlement to find out how much you should contribute to maximize the matching grant/grants.

      Reply
  10. gsing

    hi,Jj,I have rdsp for my son aged no 14,i have rdsp for last 6 years,if i do debt conolidation for my debts on my credit cards,will it effect my son rdsp.Thanks

    Reply
    • Helene Eschbach

      Hi GSing,

      The RDSP is not creditor proof. I suggest that you contact your creditors and discuss your situation. Explain that all the grants and bonds that your son has received into his RDSP will be repayable to the government.

      Reply
  11. JJ

    HI , I was accepted to obtain the DTC , and open a RDSP plan several years ago . When I received a letter explaining my acceptance to the DTC , I was not helped , or explained properly what I needed to do to open a RDSP account ,and how to use the plan .

    I went to my Financial establishment several years ago after my acceptance to DTC , not BMO , and I INQUIRED what were my options with the DTC ,and savings . I told them I was doing RRSP for many years ,and I was told this option was good enough . I was never instructed to open a RDSP account ,and was told a RRSP was good enough. I went back again after a few years asking , what else I could do ! Finally , I was instructed to open a RDSP ,at this point I was 49 ,and my birthday had just passed Dec 31 of that year. Now I was told I was to late to collect any thing into my RDSP plan , but they would be happy to open it , I was a bit upset ; I had requested info ,and help several years prior when I had been accepted for DTC ,and I was told was RRSP good enough. I am at a complete lost now , as I was mislead ,and not given proper info from my acceptance letter , or from my Financial institution , what can I do now , as I was not properly helped by either , what Justice can I get ? Can my application be backdated ,as I did apply for the RDSP finally at 49 , but passed Dec 31 , but had been accepted for DTC several years prior to all the confusion ,and misleading guidance , Please help me ,as I feel I was completely shortchanged !

    Reply
    • Helene Eschbach

      Hi JJ,
      I am sorry to hear that you are no longer eligible for the RDSP grants and bonds. Your financial institution should have told you about the RDSP.
      If they were not offering it at that time, they should have referred you to a different financial institution. There are still good reasons for you to open an RDSP for yourself. You can save, tax free until age 59. Any money that goes into the RDSP will be available to you. RDSP payments will not
      affect any provincial support that you may receive. They will also have no impact on CPP, OAS or GIS.

      Reply
  12. Sandra

    I’m trying to determine if it’s worth it to open a cdsp at my age, 54. I should qualify for 2008-2009. But if I have to start withdrawals when I’m 60, that’s less than 6 years from now, so the grants & bonds won’t have been there for the 10 years required to avoid having to repay them. Am I understanding this correctly?

    Reply
    • Helene Eschbach

      Hi Sandra,
      At your age, 54, you are no longer eligible to receive grants and bonds. You would have had to open the account before you turned 50. You still have the opportunity to open an RDSP, save and invest until the age of 59, and your RDSP will most likely (depending on which province you live in) not affect any other government program that you may be on. If you open an RDSP, you will have unrestricted access to your funds. You may deposit any amount, up to $200,000. If you have questions, please email me.

      Reply
  13. Al T

    My adult son (age 34) started an RDSP last year and we’re now playing the “catch up” game. Contributions made in Dec 2014 triggered a max payout of $10,500 in Feb 2015. Can we immediately (now in 2015) make another large contribution to trigger an early 2016 gov matching contribution or does our next contribution need to be made in 2016 – that is, same calendar year?

    Reply
    • Helene Eschbach

      Hi Al,
      Your contribution in December 2014 was for 2014 as well as two previous years.
      You can now make another contribution of $4500 for this year, 2015, as well as two
      more previous years. If you would like more information, please email me.

      Reply
  14. Wendy Tuttle

    I opened and contributed $1500 per year since 2008 & her account has been receiving all contributions as layed out no problem. I was just advised today by my lawyer that once my daughter is of age to begin receiving funds from the RDSP the government automatically takes back the last 10 years of their contribution which if it’s just federal would be $35,000. Is this correct? I was told that this is in the fine print of the agreement. Please advise. Thank you

    Reply
    • Helene Eschbach

      Hi Wendy,
      The information that you received is not correct. This is the way that the RDSP works: After your daughter receives her last grant and bond there will be a ten year waiting period.
      After the waiting period, she will begin receiving payments from her RDSP. The only way that she will lose grant and bond money is if she takes money from her RDSP before the end of
      the ten year waiting period. Please email me if your have further questions.

      Reply
  15. Tammy Dirks

    Hi there!

    I have moved and am trying to change my address on file for my RDSP With the Government.

    I have already made the address update with my BMO bank.

    When I call RDSP Government, they tell me that the Bank is responsible to send the update to RDSP.
    When I speak with BMO on the telephone at BMO RDSP, BMO regular 1-800, and in the Branch where the Branch Manager has called his contacts, they ALL tell me I can do it myself with the Government.
    Both sides are very adamant about their “how to update my address”.
    I am very frustrated.

    How do I get my address updated with RDSP Government side of things please?
    I appreciate your help.
    Thank-you very much.
    Tammy Dirks

    Reply
    • Helene Eschbach

      Hi Tammy,

      If you have questions about your RDSP grants and/or bonds I suggest that you call Employment and Social Development Canada.
      Their toll-free number is: 1-866-204-0357.
      Each year you should receive an Annual Statement of Entitlement for your RDSP.
      It comes from Employment and Social Development Canada.

      Reply
  16. Karen

    I only received a DTC retroactively (to 2008) this past year. I am now over 49 years old; however, in 2008 I was 47 so would have qualified for gov’t grants. I of course didn’t open a RDSP because I couldn’t. I’d like to open a RDSP now (I’m 54) but is there any benefit. I understand I can’t retroactively get the grants for the years I was under 49 because I didn’t have an RDSP. So why would I open an RDSP instead of say an RRSP?

    Reply
    • jcrocker

      Hi Karen, one possible, very important, benefit to the RDSP ahead of an RRSP after age 50 is that the RDSP is exempt from calculating provincial disability income and benefits but RRSPs are not. If you receiving any asset or income tested provincial disability income, the RDSP would be worth exploring.

      Reply
  17. Lynn

    …hope that one day they will get better, even though they likely will not.

    Reply
  18. Lynn

    If a person becomes eligible for the DTC in 2008 and puts $1500 yearly receiving the $3500 annual grant then in 2014 became ineligible for the DTC but was granted the dormant 5 year extension … Then in 2019 the extension expired. Would the person be allowed to keep the grant from 2008 considering the deposits had been made 10 years prior?

    (I am using 2008 because that is when the RDSP started, but several years from now those grants will add up/ One likes to ho

    Reply
    • jcrocker

      Hi Lynn,
      Good question. Basically, any gov contribution (grant or bond) that is in an RDSP for at least ten years become permanently owned by the beneficiary.So even if the RDSP collapses and all grants and bonds from the last ten years are paid back, those grants and bonds older than ten years are not paid back.If the RDSP collapses after nine years however, all of the grants and bonds would be repaid.

      Reply
  19. Wayne

    Hi
    I have a 10 year old autistic daughter with an RESP.
    I do not know if she will be able to attend post secondary, but it is something I will actively push her to achieve. It would most likely take many more years for her but is not impossible but probably unlikely.

    Having said that, if I leave her RESP until I know for sure if she will attend post secondary, and then transfer the funds to an RSDP, are the eligible government contributions retroactive ?

    Reply
    • jcrocker

      Hi Wayne,

      Good question. Eligible gov contributions are retroactive for up to 10 years (though not before 2008, when the RDSP began and not before het DTC eligibility).

      So if her RESP was shut down, any personal contributions would be paid back to the subscriber and all education grants and bonds would be paid back to the government. The investment income is what rolls over into the RDSP, rather than all being taxed the year the RESP collapses. The refunded personal contributions may then be directed to the RDSP (either in a lump sum, or over time) at the discretion of the subscriber, and such amounts would be treated like ordinary RDSP contributions – that is, they would attract grants, and would not be taxable when withdrawn.

      Reply
  20. rick & deb

    HI
    Our Daughter is an only child , we started the rdsp when it first opened . Our problem is that our daughter is so handicapped that when we are gone ,who do we trust to oversee the money for her , we will most likely stop contributing soon for that reason.
    We would of hoped if you had an amount in for 10 years , you can withdraw that amount with out penalty ,but keep contributing to the plan.We could use the money for her to improve her life as the money comes available instead of when she is old and in worse shape and the money cant be used .
    Why not make the money available over her life when she can enjoy it?

    Thanks Rick & Deb

    Reply
    • jcrocker

      Hi Rick & Deb,

      Good comments. It seems the RDSP is meant to be a later-in-life pension plan for people with disabilities. Especially as many eligible for the RDSP are not able to save enough from employment. However there are some provisions that make it so you can withdraw earlier—and as you noted, any grant or bond older than ten years remains your daughter’s—but you still do need to ask yourself whether it is the right plan for her.

      One thing to keep in mind is that you may need to address who will manage her affairs either way, as in whether you have an RDSP or not. If any of your estate gets passed to her upon your deaths, she will face this situation. Most provinces would not allow you to keep her out of your will. So you may need to set up a Trust, and then would need trustees…

      Depending where you live, PLAN has an excellent “Wills Trusts and Estates” course that helps parents just like you navigate these complex yet critical decisions. https://plan-31.myshopify.com/products/wills-trusts-and-estates-in-person

      Reply
  21. Dianne

    I have two children (15,13) with a severe learning disability, each has an RDSP. I understand they may be asked to re qualify for Disability tax credit when they are 18. If they are no longer eligible for DTC what are the rules around the RDSP? what is clawed back and what can be kept?

    Reply
    • jcrocker

      Hi Dianne,

      If someone loses his/her eligibility for the Disability Tax Credit, or the eligibility expires and is not renewed, unfortunately the RDSP is collapsed.

      This means the RDSP must be closed by the end of the following calendar year and any Grants or Bonds received within the last 10 years must be given back to the government. What is left is paid to the Beneficiary and any interest and retained government contributions are taxable in the year received. The private contributions component is not taxable.

      If you need support with an appeal if your application is not approved, contact us at futureplanning@plan.ca

      Know however that there is a new measure coming into effect next year.

      In certain circumstances, an RDSP will be allowed to remain open, but “dormant” for a period of up to five years when a beneficiary ceases to be DTC eligible, if there is a likelihood that the beneficiary will again qualify for the DTC.

      If this is the case, the holder must make an “election” whereby a medical practitioner must certify in writing that the nature of the beneficiary’s condition will make the beneficiary eligible for the DTC in the foreseeable future.

      (If so, the plan can remain open, however no additional contributions can be made to the plan during this period, no grant or bond will be paid to the plan, and no grant or bond entitlements will be accumulated. The Assistance Holdback Amount (AHA) will remain the amount as at cessation of DTC eligibility, and the new proportional repayment rule will also apply.)

      Reply
  22. kal

    She may need to phone the RDSP office directly depending how long she’s been waiting for het daughter s contributions from past years. The bond money from past years often isnt distributed unless you request it. I dont know why

    Reply
  23. Lisa

    Hi,
    I have opened an RDSP for my son and I understand most of the rules about contributions etc. but where I have been confused is how we can use this money for my son.

    He is now 7 years old and I am unsure of what will happen when he is around 20 years old (will he be self-sufficient? will he move forward to post secondary education? will he require constant supervision?) this is all unknown.

    With an unclear future, my question is whether or not he could use some of the funds to put a down payment on a house (for example), when he is say, 25 years old. As a parent, it would be peace of mind knowing that I would be setting him up for independence and a roof over his head, while making an investment in property, should this be a possible option.

    thanks

    Reply
  24. Rebekah

    Hi, I have two boys age 7 and 9 who receive the disability tax credit so I have just stopped payments to their RESP as I don’t know if they will be using them and opened ip a rdsp. Just some clarification on the purpose of an rdsp? Is it to be a long term saving plan so once we as parents are no longer able to care for them they still have income or is it like a RESP that once they are in there 20’s can use it for there needs? My boys both have autism and currently don’t know where they will get in life but don’t want to invest in something that if they actually can go to post secondary school would restrict them from the funds. Thanks

    Reply
    • jcrocker

      Hi Rebekah,

      You are right in identifying the RDSP as a long-term savings plan for later in their life. Although you can take money out at any time, if you do it too soon, there is a penalty—you pay back $3 of any grant/bond you received in the last ten years for every $1 you take out.

      Note however that RESPs can be rolled over into an RDSP, so if you are unsure whether they’ll go to a post-secondary school or not, you could leave the RESP accounts open and if your boys don’t use it, move the funds into their RDSPs. (Scroll down this page to learn more on how the rollover works: http://rdsp.com/2012/03/30/10451/)

      Lots to consider about the best way to do all this. Email me if you want to chat more: jcrocker@plan.ca

      Reply
  25. Tom Sampson

    I believe I have a non-PGAP plan since I contributed 62,000 to start the plan up. I am now in the fifth year of the plan. Just out of interest, are any of the funds contributed above the 1,500 dollars per year able to be withdrawn from the plan without significant loss of the grants or bonds provided in the previous ten years?

    Many thanks

    Reply
    • jcrocker

      Hi Tom,

      Right now, if you remove ANY money from an RDSP, ALL grants and bonds in the last 10 years need to be paid back. Starting next year, that penalty will be reduced to $3 paid back for every $1 removed. So the short answer is no, even for amounts beyond the $1,500, you cannot withdraw them without a sizeable penalty.

      Reply
  26. Judy

    Your main info tutorial does not reflect this years change on holders of the plan.

    Reply
  27. Judy

    When we looked to open an RDSP for our daughter a couple of years ago one of the rules was that if the beneficiary dies before the plan is paid out the monies contributed by different family members weren’t returned to each member but rather all was put together to be distributed to whomever the estate went to. I had wanted a plan that both my former husband and his family and any other friends and family could donate into for the benefit of my daughter, and to ease the requirement on me (the plan holder, as is now allowed) to contribute the full amount to maximize the government benefit. It shouldn’t be too much trouble to document the name of the contributor as the money is placed in the plan? Hopefully this change will be forthcoming, if it hasn’t already?

    Reply
  28. Val

    Hi,
    Are you allowed to have two RDSP accounts at two different institutions for the same plan holder?
    Thanks.

    Reply
    • jcrocker

      Hi Val,
      A plan holder is only allowed one RDSP held at one financial institution, although you can transfer an existing RDSP to a different participating financial organization. To do this, a transfer request must be completed to move a plan from one institution to another. The transfer must be for the full amount existing in the plan. Partial amounts cannot be transferred. The holder of the plan must initiate the transfer and have the required form completed by both financial organizations.

      Reply
  29. Joel Crocker

    Hi Carol,

    Good questions. And very clear.

    I want to start by saying the RDSP is quite new—having started in 2008—yet a number of changes have been made to improve it—such as carry-forward which began only last year—so it sometimes takes some time for all involved to become clear on all the details. That being said, I’ve been given plenty of misinformation on my questions about mortgages, RRSPs, RESPs, etc. from various financial professionals over the years.

    Fortunately it is the federal government that does indeed do the carry-forward calculations. They in fact mail a “Statement of Entitlement” letter to the RDSP Plan Holder(s) every year which shows all of one’s available carry forward amounts in detail. Also, people do not need to make any grant requests—their personal contributions simply trigger any available (current or past) allowances automatically, starting with the oldest, as long as taxes are up to date. No bank employee is involved.

    One point, however: The carry-forward is not indefinite. Unused grants must be claimed within ten years. Furthermore only $10,500’s-worth of grant can be caught up on in any given year.

    If these people you know have not received the Statement of Entitlement, or are having any issues with grants and carry-forwards, they can call 1-866-204-0357. You should also check out the following government website, which has a nice overview of how the carry-forward works: http://www.hrsdc.gc.ca/eng/disability_issues/disability_savings/carry_forward.shtml

    Reply
  30. Carol

    The whole program is becoming much easier to understand, BUT, I just had a phone call from a parent who opened an account for her daughter last year. Her financial institution did not explain how the carry-forward works and she assumed the RDSP just started in 2011. Today she found out that her daughter is eligible for the grant and bond back to 2008, and now she is very confused.
    I also found it rather difficult to explain how the carry-forwad works (I am not the greatest financial mind) but first I have a question, does Revenue Canada automatically back-date an RDSP account to 2008 or do you have to request that this when you open the account? Since her daughter is an adult this would make the most sense to this mother but she does not know if her bank requested this or even if they needed to.
    Now assuming the account is back dated to 2008 and the family has only contributed the minimum to get the full grant and bond this year and last year, they will still have two years of contribution room available to them. They can contribute this money at any time to “catch up”, there is no rush to put the money in today as the carry forward is indefinite until the plan becomes mature. Her bank was again not clear, they told her they did not know and to call Revenue Canada, and this mom was worried that she had missed the window for contributions.
    I hope my question is clear, does anyone have any light to shed? Did I tell the mom the right thing about contribution carry-forward? Does she need to request the carry-forward from 2008?

    Reply

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