What is the Canada Disability Savings Grant (Grant)?
It is an amount paid based on contributions deposited into a Registered Disability Savings Plan (RDSP).
If the beneficiary’s annual family income is less than or equal to $85,4141, the Government of Canada pays:
- a 300% Grant on the first $500 in annual contributions made to an RDSP and
- a 200% Grant on the next $1000 in annual contributions.
If the beneficiary’s annual family income exceeds $85,4141, the Government of Canada pays:
- a 100% Grant on the first $1,000 in annual contributions made to an RDSP.
Grant Eligibility
To receive the Grant:
- a contribution must be made to the RDSP;
- the holder must fill out an application form;
- the Grant request must be made by December 31st of the year the beneficiary turns 49;
- the beneficiary must be eligible for a Disability Tax Credit (DTC);
- the beneficiary must be a Canadian resident and have a valid Social Insurance Number (SIN).
To receive 300% on the first $500 and 200% on the next $1,000 in contributions made annually to an RDSP, the beneficiary must:
- have a family income less than or equal to $85,4141 if 18 years of age or older;
or - be a dependent of an eligible individual whose income (used to determine the amount of the Canada Child Tax Benefit (CCTB) is less than or equal to $85,4141;
or - be a person in respect of whom a special allowance under the Children’s Special Allowances Act is paid for at least 1 month in the year.
To receive 100% on the first $1000 made in contributions during the year:
- the beneficiary’s annual family income exceeds $85,4141;
or - no family income information is available from Canada Revenue Agency (CRA).
What is the Canada Disability Savings Bond (Bond)?
It is an amount of up to $1000 paid into an RDSP for a low-income beneficiary.
No contribution is needed to attract the Bond.
Bond Eligibility
To receive the Bond:
- the request must be made by December 31st of the year the beneficiary turns 49;
- the holder must fill out an application form;
- the beneficiary must be eligible for a DTC;
- the beneficiary must be a Canadian resident and have a valid SIN.
A beneficiary whose family income is:
- less than or equal to $24,8631 receives a Bond of up to $1000;
- between $24,8631 and $42,7071 receives a Bond based on a legislative formula2;
- more than $42,7071 receives no Bond;
A beneficiary whose family income is not available from CRA receives no Bond.
A beneficiary in respect of whom a special allowance under the Children’s Special Allowances Act is to be paid for at least 1 month in the year receives a Bond of $1000.
Transfers
In order for a transfer to occur :
- the transfer must be for the same beneficiary;
- all funds must be transferred;
- the prior plan must be closed;
- all information must be transferred to the new Issuer; and
- the new issuer must continue to pay DAP and LDAP.
Grant and Bond Carry-Forward Entitlements
Unused Grant and Bond entitlements will be claimed from the past 10 years (starting from 2008).
In order to access Grant and Bond carry-forward entitlements, the beneficiary must:
- be eligible for a DTC;
- be a Canadian resident and have a valid SIN;
- not be older than 49 at the time of applying; and
- not have more than $200,000 in contributions in the plan.
Annual and Lifetime Limits
The lifetime RDSP contribution limit is $200,000;
The maximum Grant payable for a beneficiary’s lifetime is $70,000;
The maximum Grant payable in a year is $3,500 ($10,500 if it includes carry-forward);
The maximum Bond payable for a beneficiary’s lifetime is $20,000;
The maximum Bond payable in a year is $1,000 ($11,000 if it includes carry-forward).
Disability Assistance Payments (DAP) and Lifetime Disability Assistance Payments (LDAP)
DAPs may be made to a beneficiary if allowed under the RDSP‘s terms;
DAPs may be requested by the holder at any time however limits could apply;
DAPs must be used for the benefit of the beneficiary;
A portion of DAPs and LDAP are taxable to the beneficiary;
LDAPs must begin no later than the end of the year in which the beneficiary turns 60;
LDAPs must be made annually once started.
Assistance Holdback Amount (AHA)
The AHA is the total amount of Grant and Bond paid during the previous 10 years that have not been repaid. It must be returned to the Government of Canada when specific events are triggered.
Specified Disability Savings Plan (SDSP)
When a medical doctor certifies that the beneficiary’s state of health is such that the beneficiary is not likely to survive more than five years, the holder can:
- choose to convert the RDSP into an SDSP;
or - keep the plan open as an RDSP.
If the RDSP is converted into an SDSP, annual withdrawals of up to $10,000 of the taxable amount or higher amount based on a legislated formula are allowed without having to repay the AHA.
If the RDSP stays as an RDSP, there is no limit to the amount withdrawn and the AHAmust be repaid if applicable.
RDSP Closure
Trigger events leading to the closure of an RDSP include loss of impairment, non-compliance to the Income Tax Act, death of the beneficiary and RDSP transfer.
Who Can Be a Holder
Holders can be parents, beneficiaries, legally authorized representatives, guardians, tutors, public departments, agencies, institutions.
Footnotes:
1 Amount is indexed each year.
2 $1,000 – [$1,000 × (family income – $24,8631) / ($42,7071 – $24,8631)]
http://www.hrsdc.gc.ca/eng/learning/education_savings/publications_resources/RDSP-quick-facts.shtml