What is a Registered Disability Savings Plan (RDSP)?
An RDSP is a one of a kind registered savings plan meant to help those living with disabilities plan for their financial future. Account holders of an RDSP may be eligible for up to $70,000 in Grants and $20,000 in Bonds over the lifetime of their RDSP account. Grants and bonds are dependent upon family net income. In many cases, it is possible to see thousands of dollars in bonds without having to make a single contribution to your RDSP account. At the very least, regardless of how much an individuals income may be – it possible to see 1:1 matching in grants vs contributions (up to a maximum of $70,000). There is no annual contribution limit but there is a lifetime contribution limit of $200,000 associated with an RDSP.
There is a 10-year repayment rule applied to the grants and bonds that are contributed by the government. This means that they cannot be withdrawn for a period of 10 years after the date of the last contribution. Effectively, this is meant to be a savings plan to help provide support to those living with disabilities when they are older.
What makes an RDSP unique?
The rates of return generated through the Bonds and Grants offered by the Canadian Government provide exceptional rates of return. Depending on family net income, account beneficiaries can receive up to $1,000 per year in Bonds without making a single contribution.
Both the government grants as well as the government bonds are retroactive up to 10 years. This often results in thousands of dollars being available upon account opening.
Canadian Disability Savings Grants
If your Family Net Income is over $98,040 (2021 Tax Year), the government will match your donations 1:1 up to a maximum of $1,000 year.
If your Family Net Income is less than $98,040 (2021 Tax Year), the government will match your donations at a 3:1 rate on the first $500 and a 2:1 rate on the next $1,000 – so, if you contribute $1,500 you will receive an annual maximum of approx. $3,500.
Note that the grants can be claimed retroactively up to a maximum of 10 taxation years.
The Canadian Disability Savings Grant is an incredibly unique tool that allows Canadian’s who are claiming the Disability Tax Credit to get a 3:1 return on their investment, depending on their family net income. The total amount of grants that are available to an RDSP holder in their lifetime equate to $70,000. An RDSP can get up to a total of $3,500 in grants in 1 tax year.
When your family net income is $97,069 or less:
• On the first $500 contributed to your account, you would get a $3 grant to every $1 contributed, up to a maximum of $1,500 per year.
• On the next $1,000 contribution – $2 grant for every 1 dollar contributed, up to $2,000 per year.
When an individual’s family net income is over $97,069:
• On the first $1,000 contribution—$1 grant for every $1 dollar contributed, up to $1,000 a year.
To summarize, even if your income is higher than $97,069 – you would still get 1:1 matching with Grants (contribute $1,000, get $1,000).
Canadian Disability Savings Bonds
If eligible, you can earn up to $1,000 in Bonds per year (Lifetime maximum of $20,000) just for opening an account – no contributions are necessary – where else would you be able to find an offer like that?
Note that bonds can be claimed retroactively up to a maximum of 10 taxation years.
The Canadian Disability Savings Bond is truly a unique opportunity for those that are eligible to claim the Disability Tax Credit to receive a benefit for the RDSP without making a contribution.
You may receive up to $1,000 per year, up to a maximum of $20,000 through the Canada Disability Savings Bond.
If your family net income is less than $31,711 – you will be eligible to receive $1,000 per taxation year. (Up to a maximum of 10 taxation years). This will be dependent upon your DTC eligibility.
If your family net income is between $31,711 and $48,535* – you will be eligible to receive a portion of the $1,000. The formula is based upon the Canada Disability Savings Act.
If your family net income is greater than $48,535 – you will not be eligible to receive the Canada Disability Savings Bond for that tax year.
What does it mean to claim the grants and bonds retroactively?
Often account holders have access to Grants and Bonds from previous taxation years, some of which can be accessed simply by opening an RDSP account. A maximum of $10,000 in Bonds dependent upon Family Net Income, as well as Disability Tax Credit eligibility is possible to get in 1 calendar year. It is also possible to get up to $10,500 in Grants depending on your Family Net Income, Disability Tax Credit eligibility, and contributions into your RDSP.
In summary, as much as $45,000 may be available to you in the form of retroactive Bonds and Grants, again dependent upon your Family Net Income, as well as Disability Tax Credit eligibility.
To get a better understanding of what may be available to you, please don’t hesitate to to contact us.
Account Classifications
There are several different classifications for Registered Disability Savings Plans. This may be dependent upon contributions into an account vs grants + bonds that have been received. If one has a shortened life expectancy, there are also stipulations for this that allow for early withdrawals.
For more information regarding account classifications for an RDSP including how that may affect withdrawals, click here
