The new registered disability savings plan will be available through some Canadian financial services institutions as early as December, according to the federal Department of Human Resources and Social Development.
However, it\u2019s not yet known which bank will be the first to unveil its RDSP offering \u2014 and none has come forward to reveal its strategy.
The RDSP is aimed at a small market: families with a disabled family member. But that doesn\u2019t mean advisors should dismiss RDSPs, says Jamie Golombek, managing director of tax and estate planning with CIBC Private Wealth Management<\/b> in Toronto. \u201cIt\u2019s going to be a niche market, absolutely,\u201d he says. \u201cBut anyone who offers this [type of account] is going to offer it as part of an integrated wealth-management program for clients.
\u201cIf we don\u2019t [offer the RDSP] and someone else does, then we risk ruining that relationship,\u201d Golombek says, noting that a number of institutions ultimately will offer the RDSP.
David Birkbeck, head of registered products strategy with Royal Bank of Canada<\/b> in Toronto, says the bank supports the introduction of the RDSP: \u201cWe have been exploring a number of options to get to market as quickly as we can. At this point, we have not yet established a launch date.\u201d
Melanie Minos, manager of media relations for the Canadian Bankers Association<\/b> in Toronto, says the association\u2019s members support the RDSP and are working on their internal systems. Banks are keeping their plans under wraps, she says, as they do not like to tip their hand to their competitors on how they will market new products.
Anyone who is eligible for the disability tax credit can establish an RDSP for him- or herself. A parent, guardian or other legal representative can also create an RDSP for an eligible person.
\u201cIt\u2019s an outstanding opportunity for parents and other relatives who have a disabled person in their family,\u201d Golombek says, \u201cto be able to save on a tax-deferred basis for this disabled person.\u201d
Families can contribute up to $200,000 on behalf of the beneficiary, until he or she turns 59, and payments to the beneficiary must begin by the end of the year in which the beneficiary turns 60.
Along with the RDSP comes another reason to save: the federal government is offering the Canada disability savings grant and the Canada Disability Savings Bond, which can provide up to $90,000 in free government money based on only $30,000 of personal contributions.
An interesting development, Golombek says, is that the federal Conservatives have promised they will allow a deceased parent\u2019s RRSP or RRIF to be transferred tax-free into the RDSP of a disabled and financially dependent child or grandchild \u2014 as long as it falls within the $200,000 limit.
Unlike RRSPs, contributions to an RDSP will not be tax-deductible. But the upside is that payments from family RDSP contributions are not considered taxable income, either. However, grants, bonds and investment income earned on a tax-free basis in the plan will be taxable when paid out.
To add to the complexity, RDSP income may result in clawbacks of provincial disability payments. To date, several provinces and territories have made announcements clarifying that they will not include RDSP income when doing means tests of income and assets for recipients of disability support programs. These provinces include British Columbia, Quebec, Yukon, Saskatchewan and Newfoundland and Labrador. But Canada\u2019s largest province, Ontario, has not made a public statement to this effect \u2014 spurring Sylvia Jones, Conservative MPP for the Ontario riding of Dufferin-Caledon, to introduce an amendment to the Ontario Disability Support Program Act. The amendment has received first reading and is scheduled for debate in December.
Ontario\u2019s intentions concerning the RDSP and the ODSP Act are not yet clear. Erika Botond, media officer with the Ontario Ministry of Community and Social Services in Toronto, says federal and provincial officials met in May and talks are continuing. \tIE<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
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