People with disabilities should live meaningful, full lives like any other citizens.

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1 INSIDE» P2-3 Starting Young P4 Contributions, Grant & Bond P5 Annuities 101 P6-7 The Teens P8-9 Holding & Operating P10-11 Young Adulthood P12 Advantages of the RDSP P13 Payments from RDSPs P14-15 The Future is Here W I N T E R 0 9 I S S U E 0 3 U P D A T E D A P R I L Canada s New Registered Disability Savings Plan People with disabilities should live meaningful, full lives like any other citizens. The Registered Disability Savings Plan (RDSP) is a new tool to help you plan for the fi nancial well-being of your relative with a disability. Already, thousands of families across the country are setting up the plan, and an estimated 500,000 Canadians will benefi t from this plan over time. This bulletin is your guide to understanding and taking advantage of the plan, so that you can help your relative with a disability capitalize on the numerous advantages of the RDSP, including the signifi cant federal contributions. invest in an RDSP but also make provisions for the creation of a trust, which might own a home or provide a receptacle for part of our estate. Before the Registered Disability Savings Plan, families had relatively few options. The Registered Retirement Savings Plan (RRSP) helps us save for retirement. The Registered Education Savings Plan (RESP) enables us to save for our children s education. But when planning for a loved one with a disability, our only option has been to establish a trust. Establishing a trust requires a visit to a lawyer, accountant or notary; sometimes entails a substantial cost, and is done without any government support. In fact, income in inter vivos or living trusts is taxed at the highest marginal rate. Now, families will have a choice that will be inexpensive to establish and provides a government contribution. The RDSP is the fi rst plan of its kind in the world. Over the long term it will provide fi nancial security and alleviate poverty among people with disabilities. The RDSP has numerous positive aspects. Contributions to the plan grow on a taxdeferred basis. Additionally, the Federal Government has established matching grants and contributions to assist people with low incomes. The Governments of British Columbia, Newfoundland and Labrador, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Yukon, and Northwest Territories have exempted the RDSP and income from an RDSP in determining eligibility for disability income programs (for details on your province/territory visit com). This means the benefi ciary will be able save and use income from their RDSP whenever they want, for whatever they want. The message from these provinces is clear: People with disabilities should live meaningful, full lives like any other citizens. Choosing between an RDSP and a trust requires an understanding of both mechanisms in order to determine which is best for your family member. Some of us may want to capitalize on the general federal government grant. Others may see trusts as a more viable option. Still others may Al Etmanski and Jack Styan in Ottawa as the RDSP receives royal assent. We hope this bulletin will assist you to evaluate the choices and make an informed decision when deciding to set up an RDSP or a trust, or both. Disclaimer: Please note that the comments in this bulletin are not intended to be and should not be construed to be, specifi c advice on any particular matter. No reader should act on the basis of any of our comments without obtaining appropriate professional advice. We expressly disclaim all and any liability to any person in respect of the consequences of anything done or omitted to be done by any such person in reliance upon our comments. plan for the future 1 or

2 Starting Young: Maggie MacKay a way of of ensuring Maggie can make personal choices For Bruce and Flora Mackay and their 10 year old daughter Maggie, it comes down to choice. It s a concept that most people take for granted, but something that is dearly important to most of us. It is the ability to choose. What will I do with my RDSP? Ballet and dance lessons Vacations to see the Royal Ballet of Canada Dinners out with friends! Photography and art classes My own home Maggie is a gifted young girl who enjoys dance classes and singing in choir. She attends grade 4 in her hometown of Lethbridge, Alberta, and has an inexorable desire to learn about everything around her. Maggie, having just returned from an overnight class field trip to the Royal Tyrell Dinosaur Museum, has her parents very excited. Sleeping in a museum overnight with your elementary class, without your parents along, is a big step for any 4th grader. The fact that Maggie has a severe disability and was able to participate represents a big step for the young girl who is starting to become more independent. This question of independence is paramount in Bruce and Flora s mind when they consider Maggie s future. They want to make sure that whatever their daughter decides to do, she has the independence to do it. With the often restrictive nature of many disabilities, Bruce and Flora see the RDSP as a way of ensuring their daughter can make personal choices when deciding her future, be it taking courses in a postsecondary institution or getting a job doing something she loves. The ability to make our own choices goes a long way in improving our quality of life. With the RDSP as a resource, Bruce and Flora want Maggie to be able go where she wants to go, and do what she wants to do, and to make those choices that make her happy. After taking a look at their finances, Bruce and Flora are planning to contribute $150 a month for 20 years. Having already saved for Maggie with the help of her grandparents, Bruce and Flora are also looking to transfer $13,000 into Maggie s plan right from the start. So what is Maggie s RDSP going to look like? plan for the future 2 or

3 SUMMARY Current Age: 10 Family Contributions until age: 30 Family Taxable Income: over $77,000 Maggie s Adult Income: less than $21,000 Annual Family Contribution: $150 a month ($1,800 a year) Estimated Income: 5.5% Lump Sum Contributions: $13,000 at age 10 Age to begin payments from the plan: 40 Province: Alberta Total Grant over 20 years: $50,000 Total Bond over 20 years: $12,000 Annual Family and Friends Contributions: $37,800 Lump Sum Family Contributions: $13,000 Total Family Contributions: $50,800 Estimated Value of the RDSP when beginning withdrawals (age 40): $329,058 Estimated Annual payments beginning at age 40: $7,653 Estimated total of payments from age 40 to 83 years: $1,251,766 $80,000 $600,000 $70,000 $60,000 $50,000 Annual Disability Payments Adjusted for Inflation $500,000 $400,000 Value of Your RDSP Dollars ($) $40,000 $30,000 Dollars ($) $300,000 $200,000 $20,000 $10,000 $100,000 Adjusted for Inflation $ $ Age Age plan for the future 3 or

4 Contributions, Grant & Bond Two of the most attractive features of the Registered Disability Savings Plan are the flexibility around family contributions and the magnitude of federal government contributions. Anyone can contribute to a person s RDSP: the beneficiary themselves, parents, grandparents, brothers, sisters, other relatives and friends. Even charities and foundations may make contributions. The only entities that are not permitted to make contributions are be pro-rated for incomes between $21,816 and $38,832. Once the income is above $38,832, no more Bond will be available. provincial governments. Permission from the plan s holder, however, must be granted for all contributions so that they can be most effectively coordinated. The maximum lifetime Bond limit is $20,000. There is a $200,000 lifetime contribution A person is eligible to receive the Grant limit for any RDSP, and the last contribution must be made prior to the end of the year in which the beneficiary turns 59. Beyond that, however, there are no limits on contributions the total can be deposited in one year or over any number of years. and Bond only before the end of the year in which they turn 49. When a contribution is made to an RDSP, the federal government will contribute a Canada Disability Savings Grant as follows: A person can open an RDSP at their financial institution and have the automatically deposited into their RDSP by the federal Government, without having to apply annually. Any individual who is eligible for the Disability Tax Credit may establish an RDSP. In order to be eligible for the Disability Tax Credit (Form T 2201) you must have a severe and prolonged disability and be certified under this criteria by a qualified practitioner. If income is less than or equal to $77,664 annually, the Grant is 3-to-1 on the first $500 and 2-to-1 on the next $1,000 If income is more than $77,664 annually, the Grant is 1 to 1 on the first $1,000. The maximum lifetime Grant limit is The federal government, however, places a holdback on the Grant and the Bond. A beneficiary must wait ten years after the receipt of the last Grant or Bond before making a withdrawal or face a penalty. The penalty is repayment of any Grant and Bond amounts received in the ten years preceding the withdrawal. Canada Disability Savings Grant and Bond The federal government will contribute to a person s plan through the Canada Disability Savings Grant and Canada Disability Savings Bond. For the purposes $70,000. The Canada Disability Savings Bond will provide up to $1,000 per year to an RDSP without any contribution, if the beneficiary s This provision has become known as the ten year rule. It s purpose is to prevent tax slippage that is, people using the same $1,500 to lever a contribution over subsequent years. of determining the Canada Disability income is less than $21,816. The Bond will Savings Grant and the Canada Disability Savings Bond, income is: INCOME LESS THAN $77,664 MORE THAN $77,664 for a beneficiary 17 years or younger: the family adjusted-net income for a beneficiary 18 years and older: the adjusted-net income of the beneficiary. Grant $1,500 for the first $500 $1,000 for the first $1,000 $2,000 for the next $1,000 Maximum Grant $70,000 plan for the future 4 or

5 Annuities 101 David Chalmers, Financial Advisor, Rogers Financial Group One option for withdrawing funds from a Registered Disability Savings Plan (RDSP) is an Annuity. So what is an annuity? And is an annuity a good choice? While this is a complex subject, here is a (very abbreviated) summary of information on annuities. An annuity is an arrangement whereby one the bluntness) that people who die quickly exchanges a lump sum of capital for a (before their life expectancy) subsidize lifetime income (the income can in some those who live a long time (beyond their circumstances be for a specified period of life expectancy). years rather than one s lifetime). By the way, all pension plans including the A Life Annuity (the most common Canada Pension Plan and Old Age Security, option) means that you make a lump sum also have this some people subsidize payment to a financial institution, usually others element. a Life Insurance Company. The Insurance Company pays you an income for the rest One must remember that the beneficiary of your life. under an RDSP may be physically challenged and this could affect his or her Of course, neither you nor the Insurance life expectancy. Sometimes (but not always) Company knows how long you will live. a Life Insurance Company will acknowledge So the payments are generally based on a health challenge and pay a higher annuity Life Expectancy. This means (forgive income as a result. Annuities are arranged by Financial Advisors and Life Insurance Agents. A qualified Advisor can assist you with information about annuities and can arrange to get quotations for you. Generally a commission is paid to the Advisor by the Life Insurance Company. Thus Advisors will generally provide information or quotations without charge or obligation. This very brief primer on annuities was provided by David Chalmers. David is a Financial Advisor with Rogers Group Financial in Vancouver He is happy to provide additional information and can be reached at dchalmers@rogersgroup.com or Discover how an RDSP can help provide a secure financial future If you or someone in your family is eligible for the Disability Tax Credit, ask us about the new Registered Disability Savings Plan (RDSP). With tax-deferred growth and potential government matching grants, an RDSP can help ensure long-term financial security. Talk to an RBC advisor about an RDSP. Call or visit 1 RBC is PLAN s Preferred National RDSP Provider. Registered trademarks of Royal Bank of Canada. TM1 Registered trademark of PLAN Canada. plan for the future 5 or

6 The Teens: Shannon Bromley will help subsidize the things Shannon loves doing most With the onset of summer, we are beginning to see the trickle of youngsters populating our local parks and play areas. The sounds of laughter and delighted screams are becoming a more common fixture against the backdrop of barking dogs, honking cars, and clinking wind chimes. What will I do with my RDSP? New computer Trips to Disneyland Toys for Austin (dog) Passes to the Aquarium A home of my own One such happy cry emanating from this cacophony of sound happens to belong to Shannon Bromley, a 15 year old teenager who lives in New Westminster with her parents Kathy and Rob, and her brother Michael. Much like any young girl her age, Shannon s life is filled with a variety of activities. You ll often find her on the baseball diamond with her dad and teammates, enjoying a friendly game of pitch, and smiling incessantly. Not an uncommon sight, except that Shannon has a severe disability called Engelmann s Syndrome, which restricts much of her mobility. This doesn t seem to phase Shannon who, with the help of her father, plays and enjoys every minute. The sight of Shannon smiling and laughing really resonates with Kathy and Rob. When they see their daughter enjoying herself this much, they understand that baseball, bowling, skiing, and all the other activities Shannon enjoys are important to her and her quality of life. Yet, as someone with a disability, Shannon needs a little extra help to be a part of many of these activities. Having heard about the Registered Disability Savings Plan, Kathy and Rob have begun discussing how they can utilize the plan to help subsidize all the things Shannon loves doing most. Together, Kathy and Rob figure they can put aside $200 a month into an RDSP and they will continue to contribute for 20 years. Family and friends have also expressed an interest in contributing to an RDSP for Shannon, and her parents figure they will get $2000 in additional contributions when the plan is opened. So what will Shannon s RDSP look like? plan for the future 6 or

7 SUMMARY Current Age: 15 Family Contributions until age: 35 Family Taxable Income: over $77,000 Shannon s Adult Income: less than $ Annual Family Contribution: $200 a month ($2,400 a year) Estimated Income: 5.5% Lump Sum Contributions: $2,000 at age 15 Age to begin payments from the plan: 45 Province: British Columbia Total Grant over 20 years: $62,500 Total Bond over 20 years: $17,000 Total of Annual Family Contributions: $50,400 Lump Sum Family Contributions: $2,000 Total Family Contributions: $52,400 Estimated Value of the RDSP when beginning withdrawals (age 45): $377,237 Estimated Annual payments beginning at age 45: $9,927 Estimated total of payments from age 45 to 83 years: $1,200,082 $80,000 $600,000 $70,000 $60,000 $50,000 Annual Disability Payments Adjusted for Inflation $500,000 $400,000 Value of Your RDSP Dollars ($) $40,000 $30,000 Dollars ($) $300,000 $200,000 $20,000 $10,000 $100,000 Adjusted for Inflation $ $ Age Age plan for the future 7 or

8 Holding & Operating Emma Ferguson, Davis LLP Entering into and operating a Registered Disability Savings Plan is somewhat complicated. The situation differs depending on whether the beneficiary is a adult or child with a disability. It also differs for adults depending on whether they are competent to handle their own financial affairs or do not have legal capacity. For families planning for relatives who require extra support in decision-making, an important issue is who should hold the RDSP. There are some questions without clear answers at this point, but we are going to shed some light on this area so that you will be better able to decide if an RDSP is right for you or your family member. The Holder When the beneficiary turns 18 and becomes When you enter into a plan, you are called an adult (under federal law), the holder of the account holder of the plan and you have the plan remains in place. Depending on the the responsibility for managing the plan: type of plan, responsibilities of the holder for example, coordinating contributions from may be transferred to the beneficiary, or the others; directing investments; and deciding holder and the beneficiary may become joint on the amount and timing of payments. holders if the financial institutions permit. You are also responsible for ensuring that all payments from the plan are used for If the financial institution permit, two the beneficiary. The role is similar to the parents may be joint holders of a child s role of a trustee of a trust but, unlike those plan so that if one is unable to fulfill the trustees plan holders are not entitled to responsibilities of the role, the other would a fee for fulfilling their responsibilities. remain as holder. It is also possible for a holder to assign the role to another person Children but the person must be: Let s start with children, those who are 17 years old or younger. If you are the parent the beneficiary (or the beneficiary s or guardian of a child, you may enter into a estate), plan in their name. The Public Guardian and a parent or guardian of a child, Trustee the provincial entity responsible a person legally authorized to act for handling the financial affairs of children on behalf of the beneficiary, who do not have a parent or guardian a current or previous holder of the plan, in their lives may also open a plan for or a child, if they are managing the child s the Public Guardian and Trustee. financial affairs. When the beneficiary turns 26, they have the right to direct that payments be made from the plan at least once per year. Adults Three entities may enter into a plan for an adult. They are: the beneficiary, himself or herself (the beneficiary may also be able to open the plan jointly with another person or agency who is authorized to act on behalf of the beneficiary, if financial institutions permit), a person legally authorized to act on behalf of the beneficiary, or the Public Guardian and Trustee. Thus the situation is clear when the beneficiary is able to manage their RDSP independently; they may be the holder of their own plan. The situation is also clear where a person has an adult guardian. Adult guardians have different names in different provinces. In BC, they are committees. In Alberta, trustees. In Quebec, curators. In all of these cases, however, the disabled person has been deemed to be incapable of making decisions about their care or finances (or both) and a court has named someone to be responsible for their care or finances (or both). An adult guardian will be able to enter into and act as holder for an RDSP. The most difficult situation is likely to be where a person does not have a legal guardian but would have difficulty managing on their own and would be vulnerable to people who might not be scrupulous. Some provinces have made provisions for supported decision-making (BC, Manitoba). This includes opening and managing a plan for the future 8 or

9 bank account, making investments and expenditures. A representative cannot buy or sell property, or draft a will on a person s behalf. A representative may be able to open and manage an RDSP either for or on behalf of a disabled person. It may also be possible for a parent to act as a co-holder with the beneficiary. If these options do not work, you will need to look at adult guardianship. To determine whether supported decision-makers will be able to fulfill these responsibilities in other provinces, you will need to check with a lawyer who is familiar with these laws in your province. Future Stewardship Unlike trusts, where subsequent trustees may be appointed by the settlor of the trust, or testator of a Will, or, if permitted by the trust, by a trustee, it is not possible for an RDSP holder to assign the role to another person unless that person is legally authorized to act on behalf of the beneficiary. This person could be an attorney under a power of attorney, an adult guardian or a legal representative (for example a representative appointed under BC s Representation Agreement Act). Parents concerned with the vulnerability of their child need to be aware that powers of attorney and representation agreements can be revoked by the person granting them. Representation Agreements permit alternate representatives to be named. This means that if a person was the holder of an RDSP by way of a representation agreement and they were unable to fulfill those responsibilities, an alternate may be able to assume that role. If an adult guardian, however, is unable to act then a new guardian must be appointed. Once appointed, they could then assume the role of holder of the RDSP. Death of the Beneficiary When the beneficiary passes away, the following occurs: any grant or bond received in the preceding 10 years is repaid to the federal government; the plan is deregistered and income tax is payable on the remaining Grant or Bond and accumulated income; and the remainder becomes part of the beneficiary s estate and is distributed in accordance with their Will, if any. If the beneficiary does not have a Will, then the provincial rules that govern what happens to a person s estate in that event will apply. Generally, the estate passes to a spouse and children if there are any. If the deceased did not have a spouse or children, then it passes to parents and, if there are no parents, then to brothers and sisters. Unlike a trust or an RRSP, the contributor can not designate a future beneficiary for the plan. Loss of Disability Tax Credit DTC Eligibility If the beneficiary loses their DTC eligibility (on evidence from a qualified practitioner), the same scenario occurs: any grant or bond received in the preceding 10 years is repaid to the federal government; the plan is deregistered and income tax is payable on the remaining Grant or Bond and accumulated income; and the remainder becomes an asset of the beneficiary. Davis LLP Suite 2800 Park Place, 666 Burrard Street Vancouver, BC V6C 2Z7 Telephone: plan for the future 9 or

10 Young Adulthood: Jocelyn Bell an opportunity to ensure Jocelyn s future financial security I m famous, I m famous! cries Jocelyn Bell, surrounded by the cast of the Vancouver theatre production of Beauty and the Beast. This is not an unusual picture. Jocelyn is a fixture in the Vancouver theatre scene, and visits backstage on a regular basis. With her gregarious charm and natural ability to entertain, Jocelyn often finds herself surrounded by performers and at the centre of attention. What will I do with my RDSP? Vancouver s best musicals Trips to see musicals on Broadway Cool, trendy clothing My annual pilgrimage to visit my American relatives A home theatre! (and a home to go with it) For her proud parents Denis and Kathie Bell, this is something they know makes Jocelyn happy. With her social nature and innate ability to meet new people, attending the theatre and then meeting cast members is something that she loves to do. Jocelyn lives at home with Denis and Kathie and enjoys a good lifestyle. Denis and Kathie ensure she is always happy and taken care of, and are able to provide many of the comforts and support Jocelyn needs to live a good life. With the help of her parents and her network of family and friends, Jocelyn is able to join in community activities and in particular enjoys swimming and church choir. When Denis and Kathie heard about the implementation of the RDSP, they began thinking about what that could mean for Jocelyn. Most of all, they both saw this as an opportunity to ensure Jocelyn s future financial security and make sure she can enjoy the same quality of life even when they are no longer there to help. Jocelyn has family all over Canada and the United States, and Denis and Kathie see the RDSP as an opportunity for Jocelyn to travel, and visit family members who contribute so much to her well-being. Denis and Kathie figure they can contribute $1,500 a year for 20 years. Family members have also indicated they would like to contribute to Jocelyn s plan, but for now they are not going to factor those contributions into the equation. So what would Jocelyn s plan look like? plan for the future 10 or

11 SUMMARY Current Age: 21 Family Contributions until age: 41 Jocelyn s Taxable Income: below $21,816 Annual Family Contribution: $125 a month ($1,500 a year) Estimated Income: 5.5% Lump Sum Contributions: $0 Age to begin payments from the plan: 51 Province: British Columbia Total Grant over 20 years: $70,000 Total Bond over 20 years: $20,000 Total of Annual Contributions: $31,500 Lump Sum Contributions: $0 Total Contributions: $31,500 Estimated Value of the RDSP when beginning withdrawals (age 51): $359,789 Estimated Annual payments beginning at age 51: $11,243 Estimated total of payments from age 51 to 83 years: $929,578 $70,000 $450,000 $60,000 $400,000 Annual Disability Payments $350,000 $50,000 Adjusted for Inflation $300,000 Value of Your RDSP Dollars ($) $40,000 $30,000 Dollars ($) $250,000 $200,000 $20,000 $150,000 $100,000 Adjusted for Inflation $10,000 $50,000 $ $ Age Age plan for the future 11 or

12 Securing a good life : Advantages of the RDSP Julia Staszewski Articled Summer Student, Davis LLP A good life for a person with a disability is the same as a good life for anyone else. It includes financial security, a place of one s own, having your choices respected, family and friends and community participation. To the extent that saving supports the goal from an RDSP, as they do for the payment of creating a financially safe and secure of funds from trusts. Thus, in BC, Alberta, future for an individual with a disability, the Saskatchewan, Manitoba, Ontario, Nova RDSP can be an excellent investment tool. Scotia, Newfoundland and Labrador, Yukon The favourable tax treatment and generous and Northwest Territories, the RDSP may government contributions make it a highly enable more community participation for beneficial scheme. The grant and the bond individuals with a disability. For persons with allow a wide range of families to save for a disability, providing funds for simple things their relative with a disability. that will enhance one s quality of life, like going bowling or to a movie, may bring If the RDSP is established early in a those things within reach. person s life and government contributions are fully taken advantage of, significant Comparing trusts and the RDSP, it becomes funds will be available when the individual evident that context is important. Saving reaches adulthood. Saving through an through an RDSP may be especially RDSP may enable home ownership for more beneficial for low to middle income families. people, which is another facet of a good The Grant, though dependent on family life according to PLAN. Home ownership donations, provides larger government not only adds to an individual s financial contributions for lower income families. security but also provides freedom and Families that cannot afford to make control over everyday living. contributions may nevertheless receive the Bond if the family income is below a certain Choice and control is another element of level. Although the set up costs are not yet a good life. This extends to managing evident, we presume they may be less than and use of finances. Unlike a discretionary setting up a trust. trust, an RDSP allows adults with legal capacity the financial freedom and Using a trust will still be an attractive independence of managing their own RDSP. option for wealthier families, especially Payments from an RDSP are similarly in the context of disposition under a will. flexible. Most provincial disability income Families who wish to leave their relative assistance programs have not imposed with a total of more than $200,000, the any limitations on how payments are used lifetime contribution limit under an RDSP, will want to establish a discretionary trust to ensure continued eligibility for provincial disability benefits. Furthermore, the age of the individual may be relevant when deciding whether to establish an RDSP or merely use a trust. Establishing an RDSP early in an individual s life maximizes its usefulness. Family and government contributions may grow tax free for a longer period of time. If the individual is older, there may be less of an incentive to establishing an RDSP. Furthermore, individuals over the age of 59, the age at which no more contributions can be made, will not be able to utilize the RDSP. It is evident that the RDSP will provide significant benefits to persons with disabilities and their families. As a savings tool, it may be superior to setting up a trust. As emphasized by PLAN, creating financial security and bringing choice into the life of an individual with a disability are two important aspects to establishing a good life. The RDSP can make this happen. Nevertheless, it is clear that trusts will continue to be important for the future financial planning of persons with a disability, especially in the estate planning context. Trusts add more certainty to the estate planning process, permit flexibility to adapt to changing circumstances of the individual and of government policy, and provide the ability to dispose of an unlimited amount of assets without jeopardizing provincial benefits. Davis LLP Suite 2800 Park Place, 666 Burrard Street Vancouver, BC V6C 2Z7 Telephone: plan for the future 12 or

13 Payments from RDSPs Jack Styan Executive Director, Planned Lifetime Advocacy Network Most people don t have to worry about withdrawals or payments from Registered Disability Savings Plans right away because they will use the RDSP to build wealth for future financial security. But if you want to know how well the plan will work for you or your loved one, you need to understand any limitations on withdrawing money from your RDSP. When thinking about payments, you need Total value of RDSP/(83 Beneficiary s Age) to consider the federal rules governing + Annuity Payments payments from RDSPs as well as local provincial rules that might affect a You ll notice that as the beneficiary gets beneficiary s provincial disability benefits. older, the size of the payments grow. You ll see this in the scenarios in the pages that RDSP Payment Rules follow. You can, however, use annuities so There are two types of payments that can that the payments are the same from year be made from RDSPs: to year. (For more on annuities see page 5.) 1. Disability Assistance Payments any For example, let s assume Stephen has payment made from the RDSP to the $100,000 in his RDSP at the age of 60. beneficiary. Option 1: Lifetime Disability Assistance 2. Lifetime Disability Assistance Payments Payments Calculated by the formula a special type of payment that must Stephen s payment would be calculated continue at least once a year after they as follows: begin. These payments can begin at any age but they must begin when the beneficiary Year 1: $100,000 / (83 60) = $4,347 turns 60 years. Year 2: $100, 913 (assuming income at 5.5%) / (83-61) = $4,587 Lifetime Disability Assitance Payments are limited to an annual maximum amount Until age 82 where a final amount of more based on the beneficiary s life expectancy than $15,000 would be paid out. and the value of the plan. This amount is determined by the following formula: Option 2: Purchase of a Life Annuity If Stephen purchased a life annuity with the Total value of RDSP/(Life Expectancy + 3 $100,000 in his plan, then he could receive Beneficiary s Age) + Annuity Payments payments of approximately $7,000/year (assuming income rate of 5.5%) from his Unless a doctor has said in writing that a RDSP for the rest of his life. beneficiary is not likely to live more than five years, life expectancy is set at 80 years. Holdback Amount This means that in most cases the RDSPs must ALWAYS keep enough money in formula will be: the plan to cover the government holdback amount. The holdback amount is the total amount of Grants and Bonds received in the last ten years. What if you don t apply for the federal Grant or Bond? If you waive the federal Grant and Bond, the RDSP permits completely flexible withdrawals. There is no holdback period or amount, you can withdraw as much or as little as you want, except that once the Beneficiary turns 60, Lifetime Disability Assistance Payments must begin. What if Family & Individual Contribution exceed those of Government? If family contributions exceed government contributions (Grant and Bond), withdrawals of any amount can be made at anytime, except: They can not be greater than the holdback amount Any Grant or Bond received within ten years must be repaid Lifetime Disability Assistance Payments must begin at age 60 years. If family contributions exceed government contributions (Grant and Bond) and ten years has passed since the last government contribution, payments of any amount can be withdrawn for any purpose without penalty. What if Government Contributions exceed those of the Family and Individual? If government contributions (Grant and Bond) are greater than those of the family and individual, then: Continues page plan for the future 13 or

14 The Future is Here: Jim Nairn Is it worth shifting assets into an RDSP verses leaving everything for Jim s discretionary trust? Continued from page 13 Disability Assistance Payments can be made before the beneficiary is 60 years of age, but maximum annual withdrawals will be limited to the Lifetime Disability Assistance Payment formula. Once the beneficiary is 60 years of age, the total amount of Disability Assistance Payments must be equal to the Lifetime Disability Assistance Payment formula. If the beneficiary is between 26 and 59 years, he or she has the right to request Disability Assistance Payments from the RDSP. These payments must not exceed the Lifetime Disability Assistance Payment formula. Provincial Implications A previously noted, disability income assistance programs in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Newfoundland and Labrador, Yukon, and Northwest Territories will permit payments of any amount, at any time for any purpose without clawbacks. Quebec, New Brunswick and Prince Edward Island are allowing some use of RDSP fund but with some restrictions (visit for details). In considering whether an RDSP or a trust is the right mechanism for financial planning, one needs also to consider the treatment of income from trusts, which varies from province to province. We are currently collecting this information. Look for it on our website in the coming months. What will I do with my RDSP? Buy a new camera Get passes to the bowling alley Save for the future For people who are a bit older, the RDSP may not present as many benefits as it will to a younger family. As well, many families may have already made plans to create a trust for their loved one and thus have to weigh the various benefits of both options. This is not to say families with older relatives with a disability cannot take advantage of the RDSP. It simply means they will have to do a little more planning to decide what works best for them. For John Nairn and his son Jim, this is With the onset of the RDSP, John is now definitely the case. John, a longtime beginning to examine whether it is worth member of PLAN, has been planning for shifting assets into an RDSP or simply leaving Jim s future financial security for some everything for Jim s discretionary trust. time. Early on, John decided that in order Because Jim is too old to receive much in to ensure Jim s continued well-being, he the way of Grant and Bond, John is especially needed to set up a discretionary trust interested in the incentives of unrestricted that would support Jim when he no longer withdrawals and tax-differed growth that the could. Since there is no cap on the amount RDSP allows in BC (and Newfoundland). you can put into a discretionary trust in BC, John will be able to contribute a John figures he could contribute a lump substantial amount towards Jim s future. sum of $100,000 as soon as the plan is Jim has a variety of interests that keep him opened. With Jim s age, the Grant and Bond busy, including photography, bowling, and would only be received for 4 years. John has volunteer work. Always one to help out when decided to instead focus on the gains he needed, Jim somehow manages to find time can receive by letting the amount grow for a to volunteer for the 411 Seniors Centre in few years, giving Jim the option of buying a New Westminster, the New Westminster home later on in life. Food Bank, and Spectrum. So what would Jim s RDSP look like? plan for the future 14 or

15 SUMMARY Current Age: 46 Jim s Taxable income: under $21,816 Annual Family Contribution: $0 Estimated Income: 5.5% Lump Sum Contributions: $100,000 Age to begin payments from the plan: 60 Province: British Columbia Total Grant: $3,500 Total Bond over 4 years: $4,000 Total of Annual Contributions: $0 Lump Sum Contributions: $100,000 Total Contributions: $100,000 Estimated Value of the RDSP when beginning withdrawals (age 60): $215,015 Estimated Annual payments beginning at age 60: $9,348 Estimated total of payments from age 60 to 83 years: $412,378 $35,000 $250,000 $30,000 Annual Disability Payments $200,000 $25,000 Adjusted for Inflation Value of Your RDSP $20,000 $150,000 Dollars ($) $15,000 Dollars ($) $100,000 $10,000 Adjusted for Inflation $50,000 $5,000 $ $ Age Age plan for the future 15 or

16 Join us in securing a good life for all Canadians with disabilities... When you become a PLAN Associate, you receive quality planning information delivered directly to your inbox or mailbox. Your information package will include the following: THERE ARE TWO WAYS TO JOIN The latest information regarding the RDSP. When we know, you ll know! Including reviews of various RDSP plan options, disability benefit impacts and RDSP updates. Crucial planning information presented in detailed topic-specific bulletins. Inspiring, practical and current information on home ownership, supported decision-making, the RDSP, taxes and so on are presented in an easy-to-read format. Connection to the PLAN community and other families through our PLANfacts newsletter full of stories, ideas and inspiration. The more you share your vision of a good life with us, the stronger our advocating voice is to government. We keep you up-to-date with the quarterly ActionPLAN 25% discount on all workshops, telelearning seminars, and online courses. Access to bestselling books, publications and online resources FREE to your inbox at or $29.95 to your mailbox. Yearly subscription to Abilities Magazine Canada s disability lifestyle magazine and/or Exceptional Family Canada s resource magazine for parents of children with special needs by Planned Lifetime Advocacy Network (PLAN). All rights reserved. No part of this document may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of PLAN. plan for the future 16 or