Canadians with disabilities are disproportionately poor, many receiving less than $10,000 per year in provincial disability support payments. Any financial gifts, say in the form of inheritances, received from parents and relatives are often deducted from support payments, leaving individuals no further ahead.
Thanks to years of tirelessly effort by the Planned Lifetime Advocacy Network (PLAN), that's about to change. PLAN co-founder Al Etmanski says, "Similar to a Registered Educational Savings Plan, the RDSP(Registered Disability Savings Plan) is designed specifically for people living with a disability. It allows anyone already eligible for a disability tax credit to invest savings tax-free until withdrawal, up to a lifetime limit of $200,000. Friends and family members can also contribute to the RDSP of a loved one."
As an incentive for people to set up a RDSP, the federal government "has also created the Canada Disability Savings Grant and the Canada Disability Savings Bond. Through the disability grant, the government will provide up to $3 in matching funds for every $1 invested, to a maximum of $3,500 a year. The disability bond provides $1,000 annually to the plans of the most vulnerable -- low-income families unable to contribute anything themselves."
Etmanski continues, "Led by British Columbia, provincial governments are responding to the RDSP by changing their regulations to allow people to have significant assets and still qualify for disability benefits. This will make it much easier for families to help their relatives financially, and people with disabilities who save money for their future will no longer be penalized by claw-back policies."
According to PLAN, RDSP highlights include:
- Like Registered Education Savings Plans, the plan will allow funds to be invested tax-free until withdrawal.
- Any individual that is eligible for the Disability Tax Credit may establish an RDSP.
- In the case of a minor child, a parent or guardian can establish and direct the RDSP.
- $200,000 lifetime contribution limit.
- Contributions permitted by the individual, any family member or friends.
- No annual limits on contributions.
- Contributions grow on a tax deferred basis.
- No restrictions on when the funds can be used or for what purpose.
As a Canadian with a disability currently living on disability benefits who is not permitted to have much in savings regardless of how frugal I am, which makes saving for expenses not covered by the benefits difficult, I find this new legislation exciting! Checking with two financial institutions so far, details are still somewhat sketchy. My husband and I will definitely make an appointment once more information becomes available at the end of January. 2009 could be off to an awesome start, financially! Only in Canada, eh? Pity!
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