For people with a disability, saving and planning for the future can be important. It could be harder to find employment, for example, and they could face increased costs for care down the road. A Registered Disability Savings Plan (or RDSP) is a specialized savings and investment tool for this purpose. Kim Parlee speaks with Julie Seberras, a Senior Manager of Wealth Planning Support at TD Wealth, to discuss how and when an RDSP can help families.
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- For people with a disability, saving and planning for the future matters a lot. It could be harder to find employment. And there could be more cost per care down the road. But there is one savings tool out there that may be able to help Julie Seberras is a senior manager of Wealth Planning Support at TD Wealth. She's here for this "Ask MoneyTalk." Julie, your question today is, "I have a disability. How would an RDSP, or a Registered Disability Savings Plan, help me?
- So in addition to RRSPs and TFSAs, those with disabilities also have the savings vehicle of a Registered Disability Savings Plan, the RDSP. One of the great benefits of the RDSP is that there's matching government grants, in addition to bonds, for those who are lower income individuals or lower income families. Another great benefit is that income taken from an RDSP is not subject to the rules when it comes to income-tested benefits or government benefits.
- And that does matter a lot for a lot of people who are trying to tap into this. Let's back up a little bit If we could and ask just who is eligible to participate in something like this?
- So of course, you must have a social insurance number in addition to being eligible for the disability tax credit. To apply for the disability tax credit, you'll need a Healthcare Provider Complete Form T2201. But it is also important to note that your eligibility for the disability tax credit can be subject to review over time
- OK. That is one of the key things once you have that DTC in place for people. Let me ask you about, maybe, who should be thinking about this. Because a lot of people think of an RDSP specifically for saving for a child-- perhaps your child or a relative's child with a disability. But you can actually-- it can be for an adult as well.
- Absolutely. So you just need, as I mentioned, to be eligible for the disability tax credit. And then with that, you can make contributions up until a maximum of age 59. And then you need to start drawing income by the time that you're 60. And as I mentioned, withdrawals are not factored in when we were talking about income-tested benefits such as old age security or guaranteed income supplement. And of course, we have those government grants which really maximize the investments.
- What about, I mean, you were thinking I mean so many people are familiar with how an RRSP works. So maybe let's compare against that. I mean, you mentioned the grants and the bonds, and that's a significant difference with RRSP versus RDSP. But how else is it different?
- So of course, when we make a contribution to an RRSP, you do get a tax deduction. That is not the case with RDSP. However, we know that when we withdraw money from an RRSP, it is subject to taxation, whereas when you withdraw all your original contributions from an RDSP, it's not subject to taxation. However, those grants and the bonds and investment growth will be subject to taxation, so that's one of the biggest differences.
We also have the age in which you need to start drawing income, and with the RDSP, that is at age 60, the year in which you turn 60.
- I know there's lots of rules here, but I'm going to assume it's probably best to talk to someone who can help you work through all the options.
- Absolutely, Kim. You know, there are so many rules and guidelines when it comes to an RDSP, so it's really important to work with a tax professional or your advisor to ensure that you're familiar with those rules.
- Julie, thanks so much. And a reminder to everybody, if you have any questions or you would like to "Ask MoneyTalk" a question, send them to us. You can send it to MoneyTalk@TD.com with "Ask MoneyTalk" in the subject line. Then we'll get to your question. We will have it answered by someone. And you can check on moneytalkgo.com, where you can find answers to so many questions about life and money.
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- So in addition to RRSPs and TFSAs, those with disabilities also have the savings vehicle of a Registered Disability Savings Plan, the RDSP. One of the great benefits of the RDSP is that there's matching government grants, in addition to bonds, for those who are lower income individuals or lower income families. Another great benefit is that income taken from an RDSP is not subject to the rules when it comes to income-tested benefits or government benefits.
- And that does matter a lot for a lot of people who are trying to tap into this. Let's back up a little bit If we could and ask just who is eligible to participate in something like this?
- So of course, you must have a social insurance number in addition to being eligible for the disability tax credit. To apply for the disability tax credit, you'll need a Healthcare Provider Complete Form T2201. But it is also important to note that your eligibility for the disability tax credit can be subject to review over time
- OK. That is one of the key things once you have that DTC in place for people. Let me ask you about, maybe, who should be thinking about this. Because a lot of people think of an RDSP specifically for saving for a child-- perhaps your child or a relative's child with a disability. But you can actually-- it can be for an adult as well.
- Absolutely. So you just need, as I mentioned, to be eligible for the disability tax credit. And then with that, you can make contributions up until a maximum of age 59. And then you need to start drawing income by the time that you're 60. And as I mentioned, withdrawals are not factored in when we were talking about income-tested benefits such as old age security or guaranteed income supplement. And of course, we have those government grants which really maximize the investments.
- What about, I mean, you were thinking I mean so many people are familiar with how an RRSP works. So maybe let's compare against that. I mean, you mentioned the grants and the bonds, and that's a significant difference with RRSP versus RDSP. But how else is it different?
- So of course, when we make a contribution to an RRSP, you do get a tax deduction. That is not the case with RDSP. However, we know that when we withdraw money from an RRSP, it is subject to taxation, whereas when you withdraw all your original contributions from an RDSP, it's not subject to taxation. However, those grants and the bonds and investment growth will be subject to taxation, so that's one of the biggest differences.
We also have the age in which you need to start drawing income, and with the RDSP, that is at age 60, the year in which you turn 60.
- I know there's lots of rules here, but I'm going to assume it's probably best to talk to someone who can help you work through all the options.
- Absolutely, Kim. You know, there are so many rules and guidelines when it comes to an RDSP, so it's really important to work with a tax professional or your advisor to ensure that you're familiar with those rules.
- Julie, thanks so much. And a reminder to everybody, if you have any questions or you would like to "Ask MoneyTalk" a question, send them to us. You can send it to MoneyTalk@TD.com with "Ask MoneyTalk" in the subject line. Then we'll get to your question. We will have it answered by someone. And you can check on moneytalkgo.com, where you can find answers to so many questions about life and money.
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