Start a Registered Disability Savings Plan (RDSP)

Contributions to an RDSP are not tax deductible and can be made until the end of the year in which the beneficiary turns 59 years of age. Contributions that are withdrawn are not to be included as income for the beneficiary when paid out of an RDSP. However, the Canada disability savings grant, Canada disability savings bond and investment income earned in the plan are included in the beneficiary’s income for tax purposes when paid out of the RDSP.

The government provides two incentives for using an RDSP. Through the Canada Disability Savings Grant, the federal government matches contributions based on the recipient’s income or family income in the case of minors. The grant amount ranges between 100% for recipients with income of more than $81,941 to 300 percent for recipients with income below $23,855. There is also the Disability Savings Bond for those with income below $40,970 which provides up to $1000 a year regardless of whether they contribute their own money to their RDSP.

A couple of new changes that are happening this year are the new tax rules will allow you to carry forward unused government grants and bonds starting from 2008. For those who qualify for the bond, opening an RDSP in 2011 will get them up to $4000 in government bonds. Beginning in July, the proceeds from a deceased individual’s RRSP, registered retirement income fund, or registered pension plan can be rolled over into the RDSP of a financially dependent child or grandchild with a disability without tax or probate implications.

It’s important to start early to maximize the grants and bonds money. The maximum government grant is $3,500 per year with a lifetime limit of $70,000. The maximum bond is $1000 per year with a lifetime limit of $20,000,

Most financial institutions can open an RDSP for you. The plan holder is the person who opens the RDSP and makes or authorizes contributions on behalf of the beneficiary. To learn more about the RDSP, click here. Most financial institutions can help you walk through the maze of starting the RDSP and answer your questions. If you are a resident of BC, PLAN offers seminars on this subject. If you live elsewhere, look to agencies like The Canadian Association for Community Living Foundation, which has chapters all over Canada, for information or contact your local autism society.