Feds give provinces more time on RDSPs

Without such a measure, certain adults with disabilities would have to be declared legally incompetent and appointed a legal guardian – a potentially difficult and costly procedure in which an individual forfeits his or her decision-making power – in order to open an RDSP.

With this measure, though, disabled individuals who require assistance in their financial matters can have a QFM open an RDSP on their behalf without the disabled person having to relinquish his or her decision-making rights.

Legal mental capacity and guardianship are provincial matters. Thus, the federal government originally instituted the QFM exception to give the provinces time to create a streamlined process for disabled adults to open an RDSP.

“We think this extension is very helpful,” says Trevor Philp, manager, registered products and managed solutions, with BMO Asset Management Inc. (BMOAM) in Toronto. “Any efforts around having more people get enrolled or sign up for the RDSP is great.”

BMOAM is a partner in the Vancouver-based Planned Lifetime Advocacy Network (PLAN), an advocacy group for individuals with disabilities. Philp says the federal government’s extension allows financial services institutions to educate people about the RDSP, which still is relatively unknown and often misunderstood by the public.

The RDSP became available in 2008 as a long-term savings vehicle for individuals with disabilities. The RDSP allows individuals to contribute up to $200,000 until Dec. 31 of the year in which the beneficiary turns 59. To open an RDSP, though, beneficiaries must qualify for the disability tax credit.

Depending upon the planholder’s income, up to $70,000 in the Canada disability savings grant and up to $20,000 in Canada Disability Savings Bonds may be added to the account until the beneficiary reaches the age of 49.

The temporary measure is not without its risks, though. The danger in giving the provinces more time is that individuals who are eligible for an RDSP but don’t have a parent, spouse or common-law partner to act as a planholder will miss out on the account’s benefits altogether, says Brendon Pooran, founding lawyer of Pooran Law Professional Corp. in Toronto: “If the provinces don’t act until 2018, then those individuals continue to lose out on thousands of dollars.”

For example, if an individual, who has neither the capacity to enter into a contract nor a QFM to do so on his or her behalf, turns 49 years of age before the province in which the disabled is resident passes new legislation, then that person is no longer eligible for the government grants and bonds.

British Columbia, Alberta, Saskatchewan, Manitoba, Newfoundland and Labrador, the Yukon and the Northwest Territories already have legislation in place dealing with the issue of mental capacity and RDSPs. The Ontario government, for its part, is working with the Law Commission of Ontario to create a framework for establishing a legal representative for RDSP beneficiaries.

In the federal budget, the government called upon the remaining provinces and territories to “take prompt action” to simplify the RDSP application process for adults who may not be able to open such a plan on their own.

Each province has taken a slightly different approach to address the issue of mental capacity. In some cases, provincial governments have created a framework for supported decision-making; other provinces have amended pre-existing legislation.

For example, B.C. allows disabled individuals to create a representation agreement whereby they can appoint a trusted person to help them make decisions or to do so on their behalf in financial matters, including the RDSP. (B.C.’s model, in fact, predates the RDSP.)

Newfoundland and Labrador, on the other hand, amended its legislation for powers of attorney in 2012 to allow adults with disabilities to appoint two people as their designates for the RDSP. However, Newfoundland’s legislation is not yet in force.

For Joel Crocker, PLAN’s director of policy and planning, the RDSP is the starting point for a broader conversation on the decision-making rights of disabled people in Canada.

“How easy it is for a person with a disability to be part of the decision-making around their life? That’s the crux of the question here,” Crocker says.

However, provincial governments’ focus is likely to remain on the RDSP for the time being, says Pooran, and the likelihood any broader decisions around legal capacity happening in the next few years is low.

Says Pooran: “Revamping the entire legal framework around consent capacity and decision-making would be quite the onerous task.”

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