FAQs

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, so effectively 100% ROI, plus growth!

Contributions to the plan are not tax deductible, but the earnings grow tax free while held in the plan.

After many years of advocacy from various stakeholders and disability support groups, the federal government implemented the Registered Disability Savings Plan (RDSP) on December 1, 2008.

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.

The total amount of grants that are available are dependent upon your income, or your family net income.

When your family net income is $100,392 (2022 grant threshold, however based on 2 prior taxation years (2020) income) 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 $100,392 (2022 grant threshold, however based on your 2020 family net income):

• 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 $100,392 (2022 grant threshold) – you would still get 100% return on your investment (contribute $1,000, get $1,000).

It is important to note that both the Canada Disability Savings Grant as well as the Canada Disability Savings Bond are retroactive up to 10 taxation years. Depending on your family net income, this may result in thousands of dollars being available just by opening up a Registered Disability Savings Plan.

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 below $31,711 – you will be eligible to receive the full $1,000 per tax year.

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.

It is important to note that both the Canada Disability Savings Grant as well as the Canada Disability Savings Bond are retroactive up to 10 taxation years. Depending on your family net income, this may result in thousands of dollars being available just by opening up a Registered Disability Savings Plan.

Both the Canadian Disability Savings Grant and the Canadian Disability Savings Bond have a 10-year repayment rule.

If any of the following occur, the Canadian Government may claw back grants and bonds:

• The RDSP is terminated
• The plan ceases to be an RDSP
• Prior to 2014, a disability assistance payment (DAP) is made from the plan
• Prior to 2014, the beneficiary stops being eligible for the DTC
• Since January 1, 2014, the beneficiary stops being eligible for the disability tax credit (DTC) and an election to extend the period for which an RDSP may remain open is not filed by the plan holder
• Where a valid election to keep an RDSP open expires
• The beneficiary dies

To summarize – the RDSP is meant to be savings plan that will be withdrawn from once an individual turns 59 years of age. Account holders are no longer eligible for grants and bonds after the age of 49. Due to the 10-year repayment rule, this would mean that account holders would be eligible to start withdrawing from their RDSP at the age of 59 without having any penalties, assuming that the last grants/bonds received were at the age of 49.

Every year there is a new threshold for bonds and grants.

For bonds, there is a low threshold, and a high threshold. IE. For 2022, the low amount would be $32,797 and the high amount would be $50,197. If your family net income is below the low amount, you would receive $1,000 in bonds. If it is somewhere in the middle between the low amount and the high amount, your bond would be prorated accordingly. If your family net income is above the high threshold, there would not be a bond available for that year

Likewise for grants, the grant threshold for 2022 is $100,392. If your income is below this, if you contribute $1,500, you would receive $3,500 in grants. If your family net income is above $100,392 – you would still be eligible for 1:1 matching.

Grants and bonds are calculated off 2 prior taxation tax years family net income.

So for example – you would need to compare your 2020 family net income against the 2022 grant/bond thresholds to see what you would be eligible for in the 2022 tax year.

3:1 matching in regards to the RDSP refers to the Canadian Disability Savings Grant.

When your family net income is $100,392 (2022 grant threshold based on your 2020 family net income) 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.

A Registered Disability Savings Plan (RDSP) is very similar to a Registered Retirement Savings Plan (RRSP). Both accounts are tax sheltered while gains are made and only at the time funds are withdrawn are taxes to be paid on any potential gains.

The main different between an RRSP and an RDSP is the ability to get contributions from the government in the form of the Canadian Disability Savings Grant, as well as the Canadian Disability Savings Bond. It is not uncommon for RDSP holders to see a 100%-300% ROI on their contributions, depending on their family net income.

Depending on your family net income, it may be possible to receive the Canadian Disability Savings Bond without making a contribution into your RDSP account. At Wealthera Inc. we provide our clients with strategic advice showing how to maximize your RDSP to ensure you are capitalizing on everything that may be available to you.

In order to be eligible to open a Registered Disability Savings Plan (RDSP), you must be eligible to claim the Disability Tax Credit (DTC). In order to be eligible to receive the Canadian Disability Savings Grant as well as the Canadian Disability Savings Bond, account holders must be under the age of 49. After the age of 49, you will not be eligible to take advantage of grants + bonds.

Yes! Dependant’s, family members – anyone can contribute towards an RDSP account, with the holder’s written consent. The holder must be aware of the third party contributions in order to ensure that the maximum $200,000 limit is not exceeded

Depending on your family net income, it may be extremely advantageous to have a contribution made to get 3:1 matching. Speak to an RDSP expert at Wealthera Inc. today to get a better understanding of how to maximize your account.

It is possible to transfer money from a child’s RESP into that same child’s RDSP if certain conditions are met. Education Savings Grants would have to be repaid back to the government from the account, but so long as the criteria is met, you won’t have to pay any taxes on those earnings in the RESP.

Reference: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/special-rules/transferring-resp-property-another-resp.html

When the beneficiary of an RDSP is a minor, the grant & bond thresholds are calculated based on the family net income.

Yes. The legal parents of a minor beneficiary may be joint holders of an RDSP. When a beneficiary reaches age of majority they can be added as a joint account holder with their parent.

Yes. If the parent has been legally appointed as a guardian of the beneficiary or is otherwise authorized to act for the beneficiary, that parent can be the holder whether the child is a minor or over the age of majority. The Minister of Finance made a change to the existing rule in Budget 2012. Under the new rules a “qualifying family member” is allowed to establish an RDSP for a beneficiary who is not contractually competent. The definition of a qualifying family member is only a spouse, common-law partner or a parent. This is a temporary change and applies from July 2012 to the end of 2023. Even though this is temporary it is important to note that the account holder is able to remain as account holder beyond 2023. It is simply that any new RDSPs cannot be opened this way after 2023.

Generally speaking, yes. One parent can be the holder, both can be joint holders or one or both can be joint holder with the beneficiary. In the case of a minor beneficiary, if the account holder is not the recipient of the Canada Child Benefit (CCB) then the recipient of the CCB must be identified in the primary caregiver section of the application.

A guardian or other representative who is legally authorized to act on behalf of the beneficiary may be a holder or joint holder of the plan.

Yes. A maximum amount of $200,000 can be contributed to each beneficiary’s RDSP, and contributions can be made until December 31st of the year the beneficiary turns 59. This is a lifetime limit and is not reset if an RDSP is transferred, or closed and later re-established. There is no annual contribution limit.

Qualified investments for RDSPs are generally the same as those for Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) and include cash, stocks, bonds, GICs, mutual funds and a variety of other investments.

Investment recommendations are made based on a number of different factors.

Yes. RDSP accounts can be opened for eligible individuals until Dec. 31st of the year the beneficiary turns 59. (Note: government matching does not apply for individuals over age 49, since the grants and bonds must be held in the account for a minimum of 10 years or be subject to repayment to the Government).

Revenues from an RDSP are excluded from the calculations for the GST/HST credit, the child tax benefit, and any similar benefits and credits offered by provinces or territories, the social benefits repayment, the refundable medical expense supplement, and the working income tax benefit.

The holder of the RDSP is the person or organization that opens, manages and contributes to the RDSP.

The beneficiary is the person who will receive the Disability Assistance Payments (DAP) or Lifetime Disability Assistance Payments (LDAP) from an RDSP.

When a beneficiary is no longer DTC eligible, there is no requirement to close the account however no contribution may be made to the RDSP.

There are three types of payments made from an RDSP:

• Disability assistance payments (DAPs) (these include lifetime disability assistance payments (LDAPs)
• Direct transfers to another RDSP for the same beneficiary
• Repayments under the Canada Disability Savings Act (CDSA) or designated provincial program

Only the beneficiary or the beneficiary’s estate will be permitted to receive DAPs from the RDSP.

A DAP is any payment from an RDSP to the beneficiary or to their estate after their death. It is a singular payment that can be requested at any time and may consist of contributions, grant, bond, proceeds from rollovers and income earned in the account.

Note: A DAP is not permitted if, after the payment, the fair market value (FMV) of the property held by the RDSP would be less than the assistance holdback amount for the RDSP.

The RDSP issuer may allow the RDSP holder to request DAPs to be made to a beneficiary that are separate from LDAPs. Contact a participating issuer to determine if it offers plans that allow an RDSP holder to request these types of payments from a plan.

LDAPs are disability assistance payments (DAPs) that, once started, must be paid at least annually until either the plan is terminated or the beneficiary has died. These payments must begin by the end of the year in which the beneficiary turns 60 and, unless the year is a specified year, are subject to an annual withdrawal limit determined by the formula described below.

A specified year is the calendar year in which a licensed medical doctor or nurse practitioner certifies in writing that the beneficiary will not live longer than five years, and includes each of the five calendar years following the year of certification. A year will not qualify as a specified year unless the medical certificate has been provided to the issuer in or before the year in question. For example, if a doctor makes such a certification in 2019, but the issuer is not provided with the certification until 2020, only the years from 2020 to 2024 are specified years for the RDSP.

A Specified Disability Savings Plan (SDSP) is a measure to provide beneficiaries who have shortened life expectancy with greater flexibility to access their savings from an RDSP. Withdrawals from an SDSP will not trigger a repayment of the assistance holdback amount as long as the sum of the taxable portion of all withdrawals made in the year does not exceed $10,000 (unless the LDAP formula result requires a greater amount to be paid). However, once the election is made, no more contributions can be made to the plan and the plan will not be entitled to any new grant or bond. Furthermore, beneficiaries will not be entitled to carry forward any grant or bond for those years under this plan.

If the RDSP is an SDSP, the specified year includes each subsequent calendar year.

If an RDSP is an SDSP, payments must start being paid from the plan before the end of the calendar year following the year in which the plan last became an SDSP.

If the RDSP is a specified disability savings plan (SDSP), withdrawals can be made from the plan in the year of certification and each subsequent year without triggering the repayment of the assistance holdback amount.

The RDSP becomes an SDSP when:

• A licensed medical doctor or nurse practitioner certifies in writing that the beneficiary of an RDSP is, in their professional opinion, unlikely to survive more than five years
• The holder of the RDSP elects in prescribed form and provides the election, along with the medical certification, to the issuer of the RDSP
• ESDC receives notification of the election from the issuer

An RDSP becomes a PGAP in a year when the total of all government grant and bond payments made into any of the beneficiary’s RDSPs in the previous years is more than the total of all private contributions made to any of the beneficiary’s RDSPs in the previous years.

Generally, in a PGAP year (other than a specified year), the DAPs (including LDAPs) must not exceed the greater of the LDAP formula and 10% of the fair market value (FMV) of the plan assets at the beginning of the year. Certain DAPs made following, and as a consequence of, a transfer of property from another RDSP of the beneficiary do not count toward this limit on DAPs.

In any year where the beneficiary is over the age of 59, the LDAP payment will not be more than the LDAP formula. In a PGAP year, the combination of LDAPs and DAPs must not exceed the greater of the LDAP formula and 10% of the FMV of the plan assets at the beginning of the year.

When the beneficiary turns 28 (or any later age up to, and including, the age of 58) during the calendar year, the beneficiary has the right to direct that DAPs be paid to him or her at any time in that year if, after payment, the FMV of the property in the RDSP is not less than the assistance holdback amount for the RDSP. The DAP that can be paid under these circumstances cannot be more than the calculated allowable amount. With the exception of plans where the beneficiary is over the age of 59, a DAP made in any other year may require that the assistance holdback amount be repaid to ESDC.

Example:

Jim Smith has the DTC and has an RDSP account. His Family Net Income in 2021 was $40,000.

As a result, he is eligible for a portion of the Canada Disability Savings Bond for that year.

In order to calculate his payout, we use the following formula:

$1000 – [$1000 * (A-B)/(C-B)]

Where:

A= Family Net Income

B=Lower threshold ($32,048 for the 2021 tax year – this threshold is different for each tax year)

C=Upper Threshold ($49,020 for the 2021 tax year – this threshold is different for each tax year)

The amount of Bond would be determined by the following:

$1000 – [$1000 * ($40,000-$32,048)/($49,020-$32,048)] = $1000 – [$1000* ($7,952/$16,972)] = $531.46

Therefore, Jim would receive a CDSB of $531.46 for the 2021 tax year.

The Disability Tax Credit (DTC) is a non-refundable tax credit (meaning your refund is based on your taxable income) that is retroactive up to 10 tax years. It is available from the Canada Revenue Agency (CRA) and it is used to reduce the amount if income tax paid on an annual basis.

Yes! In some cases, those living with a severe and prolonged disability are unable to work and as a result, may not have any taxable income. Or – even when earning an income, depending on how much taxes are being paid it may be possible that there may be unused credits available to transfer. The DTC can be transferred to a supporting family member or spouse so long as they are providing financial support for either food, shelter, or clothing.

The Disability Tax Credit has 2 amounts: a federal amount (this would be claimed on line 31600 of your income tax returns), as well as a provincial amount (this would be claimed on line 584400 of your income tax returns). Depending on a number of factors, the DTC may also unlock additional credits that may result in a refund such as the Working Income Tax Benefit (WITB) and the Child Disability Benefit. On average, refunds can work out to approx. $1,500 – $2,500 per tax year (retroactive up to 10 tax years) depending on the province of residence you file your tax returns in, and depending upon the amount of income tax you pay.

To summarize, depending on your taxable income and province, as well as the number of years your DTC claim has been retroactively approved, it is possible to receive anywhere from $15,000 – $25,000 (or more depending on other factors) from the Disability Tax Credit.

There are many ways an individual may qualify for the Disability Tax Credit. There is a section for:

• Walking
• Feeding
• Dressing
• Speaking
• Hearing
• Vision
• Elimination
• Mental Functions Necessary for Everyday Life
• Life Sustaining Therapy
• Cumulative Effects (Significantly Restricted) where you must be affected in 2 or more areas.

For more information on specific requirements, please visit our Disability Tax Credit page.

If you feel you are meeting the criteria described on our Disability Tax Credit page, we encourage you to speak with your physician. It is important to keep in mind that although your physician is ultimately responsible to sign your disability tax credit certificate, it is the Canada Revenue Agency (CRA) that ultimately determines your eligibility. We encourage everyone to be your own best advocate and ensure that your application is completed with factual medical information.

Depending on your impairment, there may be a number of different physician’s that may be able to sign your disability tax credit certificate.

• For the BADL “Vision” – A medical doctor, nurse practitioner, or optometrist can sign your DTC certificate.
• For the BADL “Speaking” – A medical doctor, nurse practitioner, or speech-language pathologist can sign your DTC certificate.
• For the BADL “Hearing” – A medical doctor, nurse practitioner, or audiologist can sign your DTC certificate.
• For the BADL “Walking” – A medical doctor, nurse practitioner, occupational therapist, or physiotherapist can sign your DTC certificate.
• For the BADL “Elimination” – A medical doctor, or nurse practitioner can sign your DTC certificate.
• For the BADL “Feeding” – A medical doctor, nurse practitioner, or occupational therapist can sign your DTC certificate.
• For the BADL “Dressing” – A medical doctor, nurse practitioner, or occupational therapist can sign your DTC certificate.
• For the BADL “Mental Functions Necessary for Everyday Life” – A medical doctor, nurse practitioner, or psychologist can sign your DTC certificate.
• For the BADL “Life Sustaining Therapy” – A medical doctor, or nurse practitioner can sign your DTC certificate.