Help
people with disabilities secure a better financial future.
Most
parents can look forward to a day when their children grow up, become
self-sufficient, and thus worry a lot less about their futures. But for
parents and family members of people with serious physical or mental
disabilities, the worry never ends.
Chartered
Accountant Ed Arbuckle, President of J. E. Arbuckle Financial Services
Inc. in Waterloo, says that typically, the government’s financial aid to
people with severe disabilities has been meagre, and largely the purview
of the individual provinces. However, in 2008 the federal government
introduced the Registered Disability Savings Plan (RDSP) to help families
save for the ongoing support of their special-needs loved ones. It also
introduced the Canada Disabilities Savings Grant (CDSG) and Bond (CDSB)
programs to assist in saving for individuals with disabilities.
If
you have a family member with ongoing, serious physical or mental
challenges, you owe it to them – and yourself – to get all of the help
you can. Here are some of Arbuckle’s top tips for making the best use of
government programs to help secure their future.
Take
the three-pronged approach – Canadians have three strategies to get
financial help for family members with disabilities, Arbuckle explains.
First is the provincial social assistance system which, in Ontario,
provides a maximum of slightly more than $1,000 per month for a single
individual. The second is a Henson trust which, with a lawyer’s help,
can provide funds to people with special needs that won’t necessarily
compromise other sources of funding or trigger “clawbacks” of
government benefits. The third is the federal government programs: RDSPs,
CDSGs and CDSBs.
Meet
the requirements – To qualify for the federal government programs,
beneficiaries must be eligible for the Disability Tax Credit, which
requires a qualified practitioner to certify that the individual has a
severe and prolonged physical or mental impairment that limits their
activities of daily living. In order to establish an RDSP, each
beneficiary must also have a Social Insurance Number, be a resident of
Canada at the time they enter the plan and be less than 60 years of age at
the time contributions are made to the plan.
Work
the plans together – Canada Disability Savings Grants are amounts that
the government contributes to help enhance the funds you put into an RDSP.
Through the CDSG, the government matches the RDSP contributions you make
by as much as 300 per cent, depending on the beneficiary’s family income
and the amount contributed to the plan.
Get
extra help for low-incomes families – CDSBs are the second direct source
of government funds that target people with disabilities, specifically
from low-income families. Even with no contributions to RDSPs, a Canada
Disability Savings Bond can provide up to $1,000 per year, or $20,000 over
a lifetime to qualified applicants.
Aim
for the maximum – Each year, through the CDSG, the government may
contribute up to $3,500 to an RDSP, to a lifetime maximum of $70,000.
These amounts will only be paid until December 31 of the year in which the
beneficiary reaches 49 years of age, so start early, even if contributions
are small. Plan holders and their families who contribute just $1,500 a
year over 20 years can potentially receive $70,000, says Arbuckle.
Complete
the paperwork – Form T2201, the Disability Tax Credit Certificate, must
be completed by a qualified practitioner and used to apply for the
Disability Tax Credit, which itself can help offset taxes on earnings that
the individual with the disability would otherwise have to pay. The
application must then be approved by the Canada Revenue Agency. RDSPs are
administered by banks and other financial institutions, which can usually
supply the proper forms and information.
Growth
is tax-free; withdrawals…not necessarily – Contributions to an RDSP
are made in after-tax dollars, and they grow tax-free inside the plan
until withdrawn by the beneficiary. There are no stipulations as to how
the beneficiary may use the money, and funds must start to be withdrawn by
December 31 of the year in which he or she turns 60. To the
extent that withdrawals come from direct contributions to the RDSP, they
don’t constitute taxable income for the beneficiary. But the CDSG, the
CDSB and any investment income earned in the plan are taxable and must be
included in the beneficiary’s income for tax purposes when they are paid
out of the RDSP.
With
these new programs – and some careful planning on the part of their
caregivers – people with disabilities will have a better-than-ever
chance for a more secure financial future.
Brought to you by The Institute of Chartered
Accountants of Ontario
