With everything changing rapidly, getting your financial future secured and planned out should be at the helm of your thoughts. When it concerns people living with disabilities and their families, sorting and planning for a good financial future is a somewhat complex and different ball game. This is why this article, will focus on Canada’s Registered Disability Savings Plan RDSP - an innovative saving scheme that helps individuals with disabilities aim higher and have better control of their finances.
Let’s dive into the Registered Disability Saving Plan in its entirety.
What is the Registered Disability Saving Plan?
The RDSP is a registered savings plan designed to help families and individuals living with disabilities in Canada and eligible for the Disability Tax Credit (DTC), to save for long-term financial needs. It is a savings plan developed to guarantee the long-term financial planning and security of individuals with disabilities.
RDSP is a special program for Canadians by the government to help individuals with disabilities and their families, save for long-term financial needs. We can also call an RDSP a registered and matched savings plan for individuals with disabilities.
It is a matched savings in the sense that the beneficiary receives contributions from the government for every contribution made to the savings plan. Speaking with a financial advisor in Edmonton can help you understand the intricacies of this savings plan and how you can benefit from it.
For a beneficiary having less than $100,300 as income:
For the first $500 contributed into the savings plan, every 1 dollar that is contributed is matched with up to 3 dollars by the government. Subsequently, for the next $1000, every 1 dollar contributed is matched with up to 2 dollars by the government.
For a beneficiary having more than $100,300 as income:
For the first $1000 contributed into the savings plan, every 1 dollar that is contributed is matched with 1 dollar by the government.
Who Participates in a Registered Disability Savings Plan?
There are four participants in any RDSP, and it includes the beneficiary, the plan holder, the contributors, and the government.
The beneficiary: This is the person with a disability who needs the financial support and security.
The Plan Holder: This can be a person, an agency, or a financial institution responsible for handling the RDSP on behalf of the beneficiary. In some cases, individuals or families can also serve as plan holders.
The Contributors: These are organizations, individuals, families, and caregivers who contribute to the RDSP for the beneficiary.
The government: The RDSP is a matched saving plan, hence, the government is also a participant as the beneficiary receives benefits from the government in the RDSP.
Working with a qualified Edmonton financial planner can help you decide if this plan is right for you based on your financial goals.
Pros of Having a Registered Disability Saving Plan
Many saving plans like the registered retirement saving plan have their advantages but having a savings plan matched by the government is a big win. But that’s not the only advantage of having an RDSP. Here are some more advantages;
Rules have been set in place to attend to the withdrawal demands at any point. RDSP enables beneficiaries to access the contributions at certain periods.
No age barriers
In contributing to RDSP, there are no restrictions when it comes to age, making it possible to continue building savings.
Anyone including other beneficiaries could contribute to a beneficiary’s RDSP, and the contributions can be made anytime. Even though the plan has an annual limit for contributions, you are not obligated to make regular contributions to the account.
RDSP gives room for the tax to be deferred till the point of withdrawal, helping the savings grow faster, and even then, little or no tax is deducted when the withdrawal is done. Working with a financial advisor in Alberta can help you make the most of this unique savings' plan.
There is only one type of RDSP, which is the Individual RDSP, and it can only be opened for one beneficiary. The parent, caregivers, or beneficiary can serve as the plan holder and oversee the processes involved with the RDSP while working with a registered financial advisor in Edmonton.
The RDSP is specifically tailored for individuals living with disabilities, and here’s a detailed list of criteria to be considered eligible:
The beneficiary must possess or acquire a valid Social Insurance Number SIN.
Must be eligible for the Disability Tax Credit. Reach out to an Alberta financial advisor for more details about your eligibility.
Must be a Canadian resident
Must be under the age of 60 at the time of opening the plan.
Can anyone Open an RDSP
According to the Canadian government, an RDSP can only be opened by the people mentioned in the list below;
A person (major) living with a disability and can manage their finances
A parent of a child living with a disability
A guardian, caregiver, or anyone related and legally authorized to act on behalf of the individual living with a disability
Registered Disability Savings Plan Withdrawal
Withdrawals can be made by or on behalf of the beneficiary at any time, noting that withdrawals only start before the end of the year the beneficiary turns 60. You also have to allow the grants in the RDSP to mature (at least 10 years) before processing a withdrawal to avoid being penalized.
Consulting a financial advisor in Alberta can help enlighten you about how the RDSP works in relation to your goals and established financial patterns.
Disability Assistance payment DAP
This is the payment from the RDSP made to the beneficiary, or their estate in the event of their death. Only the beneficiary or their estate is eligible to receive the DAPs. A type of this payment is the Lifetime Disability Assistance Payment LDAP. You can work with an accredited Edmonton financial planner to process this.
What if the beneficiary dies?
In the event of the death of an RDSP beneficiary, all the government grants in the RDSP for less than the period of 10 years will be returned or paid back to the government. In addition, all the remaining funds will be paid to the estate and shared by the beneficiary's will; then the RDSP will be emptied and closed by December 31 of the same year.
By offering tax advantages, alongside government grants, RDSP is a valuable financial tool enabling the empowerment of people living with disabilities and their families, providing them with a means for secure and stable financial needs. To speak with our accredited financial advisors Contact us today and let us walk you through the process!