1. Saving for a Secure Future: The Mackenzie Registered Disability Savings Plan
Thank you for the opportunity to speak with you today about the Registered Disability Savings Plans. Today I will go through the basics of the RDSP and help you understand how this could benefit you and/or your loved ones.
The presentation will be approximately 40 minutes in length ensuring we will have time for questions at the end. If you would prefer to ask questions during the presentation please feel free to stop me a any time.
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2. The Registered Disability Savings Plan (RDSP)
Registered investment plan Launched in 2008 by the Federal Government Federal/provincial matching and funding One account per beneficiary
The RDSP was launched in 2008 by the Federal Government in an effort to encourage people with disabilities (and their families) to save for the long term.
When the RDSP was launched the government also launched two programs that work in conjunction with the RDSP – they are the Canada Disability Savings Grant (CDSG) which is a matching program and the Canada Disability Savings Bond (CDSB) which is made for low income families. I will discuss both these programs later in the presentation.
One province has taken it a step further – in BC low income families are able to apply to receive a contribution from the Endowment 150 fund. This is an income tested contribution. If someone is eligible when the RDSP is opened BC will deposit $150 to the account in an effort to help the individual save for the future. No contribution is required to receive this contribution, it is strictly based on the family’s income.
It is important to be aware there can only be one account per beneficiary. This is not like other account types where you can have several accounts set up at different institutions. You are only able to have one active account at any given time.

3. “Qualified” Disabled Beneficiary
Recipient of Disability Tax Credit (T2201 Disability Tax Credit Certificate)
Less than 60 years of age
Canadian resident
Valid Social Insurance Number
There are four criteria required in order to be eligible for the RDSP.
First and foremost the beneficiary must be eligible for the disability tax credit. If they are not and you believe they would be eligible you can help them complete CRA form T This is completed by a physician or nurse practitioner and sent to CRA. Based on how the form was completed and how CRA interprets the information will determine whether someone will be eligible for the DTC.
The next criteria is the beneficiary must be a Canadian resident, have a valid SIN and they can open the plan until December 31st of the year they turn 59.
As long as these criteria are met the beneficiary is able to open the RDSP.

4. Why apply for the Disability Tax Credit
Benefit from a reduction in income tax payable
Non-refundable tax credits
Medical Expense deductions
(not covered by other means)
Can be transferred from a dependant
CRA will back-date and review tax returns
10 years back
Date of disability
It is in the beneficiary’s best interest to apply for the DTC. This provides them with a non-refundable tax credit that can substantially help reduce the amount of tax payable they have. If they cannot use the entire amount in the year it can be transferred to someone the beneficiary is dependent on (i.e. a parent).
When the beneficiary becomes DTC eligible they are able to ask CRA to reassess their previous tax returns. CRA will go back a maximum of 10 years or to date of diagnosis. This can translate into substantial refunds, it is not uncommon for someone to receive a refund of $10k, $15k or in some circumstances as much as $20k.

5. Qualifiers for Disability
Generally
Impairment in Physical or Mental Functions lasting or expected to last at least 12 months
Specifically
Blindness
Receiving life-sustaining therapy
Markedly restricted in one or more daily living activities (e.g., speaking, feeding, dressing, walking, mental functions, digestion)
In order to qualify for the DTC it must be determined that the beneficiary’s impairment is either physical or mental in nature and is expected to last at least 12 months.
Examples of impairments that would qualify for the DTC are blindness, deafness, illnesses where someone is receiving life sustaining therapy.
Whether or not someone will receive the DTC is dependent on the severity of their impairment. For example if someone is autistic they may be eligible for the DTC depending on where on the autism spectrum they fall.
Unfortunately there is no definitive answer when asked if a particular impairment would be eligible, every individual situation is different.

6. “Accountholder” versus “Beneficiary”
Beneficiary is an Adult (18 or older)
Must have legal capacity to be accountholder
If no capacity – parent or guardian or other representative who is authorized to act is accountholder
Until 2018 – Parent or Spouse/Common-law partner can open without Court authorization
Beneficiary is a Minor (under age 18), then accountholder may be
Legal parent(s)
Guardian or public department/agency legally authorized to act
Every RDSP has two parties the account holder and the beneficiary. If the beneficiary is age of majority and contractually competent they must be the account holder and the beneficiary of the account. If they are not contractually competent then a qualified family member(parent, spouse or common-law partner) can be the account holder and the beneficiary would still be the beneficiary of the account.
If there is no qualified family member in the picture then someone would need to go to court to become the beneficiary’s legal guardian and they could be the account holder at that time.
If the beneficiary is a minor generally it is the parent(s) who is the account holder. If the parent is not in the picture it would be the beneficiary’s legal guardian.
Once the beneficiary reaches age of majority they must become the account holder on the account. If they would like they can leave their parent on the account and they can be a joint account holder. They also have the option of removing the parent and becoming the sole account holder.

7. Maximum $200,000 lifetime Funding
Non-deductible contributions can be made by anyone
Plan holder must authorize
Tax-deferred rollovers of RRSP/RRIF/RPP
No Government matching
No annual limit
Contributions before age 60
Maximum $200,000 lifetime
Anyone is able to make contributions to an RDSP account but if someone other than the account holder is making the contribution they need the account holder’s consent. The reason for this is because there is a lifetime limit of $200k that can be contributed to the account so the account holder needs to know all contributions going into the account to ensure they do not exceed the maximum. The other reason is if they would like to maximize grant they need to know how much is being contributed to the account.
There is no annual contribution limit.
Contributions can be made until Dec.31st of the year the beneficiary turns 59.

8. RDSP and the Government: Canada Disability Savings Grant (CDSG)
Contributions may qualify for matching CDSG
Eligible until December 31st at age 49
Maximum lifetime CDSG is $70,000
Family Net Income* CDSG matching rates Max. annual CDSG
Up to or equal to $91, % on first $500 $3,500
200% on next $1,000
Over $91, % on first $1,000 $1,000
As mentioned previously the CDSG was created when the RDSP was launched. This is a matching program and someone is eligible until Dec. 31st of the year they turn 49. The lifetime limit someone can receive in CDSG is $70k
The CDSG is based on family net income. If the beneficiary is under 18 it is based on the parents’ family net income. If they are over 18 it is based on the beneficiary’s family net income as of Jan. 1st of the year after they turn 18. This is the case regardless of where the beneficiary lives and whether or not they are dependent on their parent(s).
If the beneficiary’s family net income is $91,831 or less they would be eligible for the maximum grant. Annually, on the first $500 contributed they would receive a 300% match, on the next $1000 contributed they would receive a 200% match. That means a $1500 contribution gives the beneficiary $3500 in grant.
If the beneficiary’s family net income is above this threshold they will receive a 100% match on the first $1000 contributed annually.
*2017 rates (indexed annually to inflation). For a minor beneficiary, the family net income is that of his or her parents. Where the beneficiary is over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable.

9. RDSP and the Government: Canada Disability Savings Bond (CDSB)
No contributions for annual CDSBs
Eligible until December 31st at age 49
Maximum lifetime CDSB is $20,000
Family Net Income* Maximum annual CDSB
Up to or equal to $30, $1,000
Between $30,000 and $45,916 $1,000 reduced on a prorated basis
Over $45,916 No CDSB is paid
The CDSB is meant for low income families and is based solely on family net income. No contributions are required in order to be eligible for the bond.
As with the grant, someone is eligible for bond until Dec. 31st of the year they turn 49. The lifetime maximum someone can receive is $20k.
As with the grant this is based on family net income. If someone has a family net income of $30k or less they are eligible for the maximum bond of $1000.
If they are between $30k and $45,916 they are eligible for a prorated amount. If they are above $45,916 they are considered to have too high of a family net income and are not eligible for bond.
*2017 rates (indexed annually to inflation). For a minor beneficiary, the family net income is that of his or her parents. Where the beneficiary is over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable.

10. Maximizing Grants and Bonds in Coming Years
Catch up on 10 years worth of Grants
Contribute $3,500
Gives you $500 x 300% x 7 years = $10,500
Contribute $4,250
Gives you $500 x 300% x 4 year = $6,000
Gives you $1,000 x 200% x 2.25 years = $4,500
Total $10,500
Contribute $5,000
Gives you $500 x 300% x 1 year = $1,500
Gives you $1,000 x 200% x 4.5 years = $9,000
2020 – Contribute $5,000
Total $ 10,500
2021 – Contribute $3,250
Gives you $1,000 x 200% x 2.75 years = $5,500
Total $ 7,000
Totals: $49,000
Contributions $21,000
Grand Total $ 70,000
Maximum grant someone can receive in one year is $10,500. Catch up can go back 10 years or to date of diagnosis. Since RDSP was launched in 2008 catch up can go back until then.
$3,500 contribution will give maximum annual grant of $10,500. This is calculated as follows:
300% on $3,500 ($500 per year for 7 years) for a grant of $10,500.
$4,250 contribution will give the maximum annual grant of $10,500. The breakdown is as follows:
The beneficiary is eligible for 4 years at $500 at 300% for a grant of $6000.
The beneficiary would use $2,250 (2.25 years) worth of carry forward at 200%, for $4,500 in grant plus the $6,000 maxes out the client for the year at $10,500.
$5,000 contribution will give $10,500 in grant. Since it is a new year the first $500 contributed will receive grant of 300% for $1,500. They would use $4,500 (4.5 years) at 200% to give $9,000 add that to the $1500 for a maximum grant of $10,500.
$5,000 contribution will give $10,500 in grant. Since it is a new year the first $500 contributed will receive grant of 300% for $1,500. They would use $4,500 (4.5 years) at 200% to give $9,000 add that to the $1500 for a maximum grant of $10,500.
$3,250 contribution will give $7,00 in grant broken down as follows: $500 contribution will receive 300% grant for $ $2,750 (2.75 years) will receive 200% match for $5,500. Add to that the $1500 for total grant of $7000 and the beneficiary has caught up on the carry forward.
They received total grant of $49k made contributions of $21K so they have an account balance of $70k without taking growth into consideration.

11. Getting money out of an RDSP
Lifetime Disability Assistance Payment (LDAP)
Disability Assistance Payment (DAP)
Withdrawals are made up of a portion of contributions, income, CDSG and CDSB
No restriction on use
There are two ways to get money out of an RDSP, there is the Lifetime Disability Assistance Payment (LDAP) or a Disability Assistance Payment (DAP).
Whether it is an LDAP or DAP whenever a withdrawal is made it is always a combination of grant, bond, growth and contributions. You cannot say you only want to take out growth or only want to withdraw contributions. It must always be a combination of everything.
There is no restriction on use of the withdrawn money.

12. Lifetime Disability Assistance Payment (LDAP)
Annual payments begin at any age but no later than end of the 60th year
Once begun continue until death of beneficiary
Withdrawal amount calculation:
Value of the Plan
3 + (life expectancy – age)
$ 400,000
3 + (80 – 60)
= $17,391
The LDAP can start at any point but must begin by Dec. 31st of the year the beneficiary reaches age 60. If someone begins it before age 60 it is important to know it cannot be turned off unless the funds in the account have been depleted or the beneficiary passes away.
As a result it important to ensure this is not started too early. The money in the RDSP is meant for retirement.
The formula for the LDAP is indicated here. Life expectancy with an RDSP is always age 80. The value of the account that is used is the value Dec. 31st of the previous year.
The LDAP payments can be set to pay out monthly, annually, quarterly, semi annually. It is up to the beneficiary to determine what frequency is best for them.

13. Disability Assistance Payment (DAP)
The DAP is more of a one off withdrawal. If you need money to make a down payment on a home, pay for university, go on vacation etc. you would do a DAP withdrawal.

14. Disability Assistance Payment (DAP)
Lump sum payment
Made to beneficiary or the estate
Maximum withdrawal the greater of LDAP formula:
Value of the Plan
3 + (life expectancy – age)
$ 400,000
3 + (80 – 60)
= $17,391
Or 10% of Plan Value $40,000
The maximum amount that can be withdrawn as a DAP is the greater between the LDAP formula and 10% of the account.

15. DAP withdrawal for a PGAP
Primarily Government Assisted Plan (PGAP)
No minimum DAP withdrawal regardless of age
DAP is the greater amount between LDAP formula and 10% of the fair market value of the RDSP.
DAP plus LDAP cannot exceed greater of LDAP formula and 10% of the account.
A PGAP is a primarily government assisted plan, this means there is more government money (grants and bonds) in the account than there are private contributions.
Where this is the case there are rules to the amount that can be withdrawn.
The maximum amount is the greater amount between the LDAP formula outlined earlier and 10% of the account.
If someone is age 60 or over the maximum amount that can be withdrawn from the account is the total of all DAPs and the LDAP. This cannot exceed the greater of the LDAP formula or 10% of the account.

16. DAP withdrawal for non-PGAP
Non-PGAP, more private contributions than government
No minimum DAP amount
No maximum DAP withdrawal amount
A Non-PGAP has more private contributions in the plan than government money.
There is no maximum DAP withdrawal amount but it is important to note that that the DAP withdrawal cannot be more than the AHA amount.

17. Assistance Holdback Amount “AHA”
All Government monies (CDSG/CDSB) received have a 10-year hold
Any payments made within 10-year period will force repayment
Account opened in 2010
CDSB received 2010, 2011, 2012, 2013, 2014, 2015, 2016
Withdrawal 2017 – $3 dollars for every $1
The government wants the RDSP to be a long term hold and have it used for retirement. As a result they have created the assistance holdback amount (AHA) to discourage withdrawals from the account.
When the beneficiary makes a withdrawal the government will look to see if grant/bond was contributed to the account in the 10 years prior to the withdrawal. If there were contributions then the government will claw back $3 worth of grant/bond for every $1 redeemed.
They have set this up because they want to discourage people from making contributions to the account, receiving grant/bond. Redeeming that grant/bond, recontributing the money and receiving additional grant on the contributions.

18. Trigger Events for AHA Closure of the RDSP Non-compliance of the RDSP
Death of the beneficiary
Loss of eligibility of the DTC
Payment of a DAP or LDAP
Go through list

19. Taxation of Withdrawals
Withdrawals made up of:
Original contributions (after-tax)
Investment income
Canada Disability Savings Grants (CDSG)
Canada Disability Savings Bonds (CDSB)
Tax will be withheld on payouts relating to investment income, CDSG and CDSB to reduce tax at year-end
Due to the fact that RDSP contributions are made with after tax dollars these are not taxable when the money is redeemed. What is taxable is the growth, grant and bond.
Also, if tax deferred rollovers are done in the account, these will be discussed shortly, these will be taxable when withdrawn because they were not taxable previously.
Like an RRSP these amounts are taxed as income when withdrawn.

20. RDSPs – Minimum & Maximums
Starting in 2014
Increase annual withdrawal limit from PGAPs to the greater of;
LDAP formula, and;
10% of the FMV at beginning of year
Apply minimum LDAP withdrawals to ALL RDSPs
When the RDSP was first launched there was a legislated minimum withdrawal amount for an LDAP when the account was a PGAP but no legislated minimum when it was a non-PGAP.
As of 2014 an LDAP must be based on the LDAP formula regardless of whether the account is a PGAP or non-PGAP.
The government also realized there are times where people need to access more of their money so the maximum amount that can now be withdrawn annually is the greater amount between the LDAP formula and 10% of the account.

21. RDSPs – Rollover of RESP Income
Starting in 2014:
Tax-deferred rollover of RESP investment income to RDSP
Must be RDSP eligible and AIP conditions must be met
No Government assistance
If a beneficiary of an RDSP is also the beneficiary of an RESP and it is determined they will not attend post secondary education they can collapse the RESP and roll the Accumulated Income Payment (AIP) from the RESP to the RDSP on a tax deferred basis.
Since this is a rollover it is not eligible for grant but does count against the beneficiary’s lifetime contribution limit.
When this rollover happens the 20% penalty that normally applies when an AIP is redeemed is waived.

22. RDSP Developments Cessation of DTC Eligibility
Extend period RDSP may remain open when beneficiary becomes DTC ineligible
Medical practitioner certification required
Election by Dec 31st of the following year
Implications of election
Valid until end of 4th year following 1st full year
The government now allows for the option of leaving an RDSP account open in the event that the beneficiary loses their DTC.
In order for this to be possible the beneficiary’s doctor must certify that they believe the beneficiary will regain their DTC eligibility within 5 years. The beneficiary would forward that note and a DTC election form to Mackenzie and we will essentially freeze the account.
No new contributions are permitted to the account, the account is not eligible for grant/bond or carry forward of grant/bond. One the beneficiary regains their DTC they notify us and we will reactivate the account.
In the event that the beneficiary never regains their DTC the account would need to be closed by Dec. 31st of the 5th year.

23. Eligible Transfers Transfer of RDSP from one institution to another
All history must transfer
New account “Pending” until original closed
Rollover of RRSP, RRIF or RPP from deceased parent or grandparent
Beneficiary must be “financial dependent”
Taxable when withdrawn
Rollover RESP AIP for the same beneficiary
Inheritance/gift from others
Withdrawals tax-free
Pairs well with a “Henson” Trust
There are several ways to transfer money into an RDSP. The first is to move the plan from one institution to another. In this case the new account is a pending account until the old account has been closed and ESDC has been notified it is closed. Once this happens the new account would be the active account and can accept contributions.
If the beneficiary’s parent/grandparent passes away and the beneficiary was financially dependent on them they may be able to rollover the deceased’s RRSP/RRIF or RPP on a tax deferred rollover. The amount rolled over does count against the beneficiary’s lifetime contribution limit of $200k and is not eligible for grant.
We find the RDSP and the Henson Trust pair well. If a beneficiary has a Henson Trust they can transfer money from the Henson Trust to the RDSP annually in an effort to maximize grant. The RDSP is considered a disability related item when it is transferred from the Henson Trust.

24. Case Study – RRIF rollover
Client Sarah, age 81 - $500,000 in her RRIF
Disabled son John is financially dependent
Two other adult children not disabled
No Rollover to John:
$500,000 taxable to Sarah = $225,000 in tax
$200,000 Rollover to John’s RDSP:
$300,000 taxable to Sarah = $135,000 in tax
Saves the Estate $90,000 in tax
Let’s look at an example. Sarah passed away and had $500k in her RRSP. She has three children, two are not disabled and one, John, is disabled and is financially dependent on Sarah.
If there is no rollover to John the $500k is taxable to Sarah in her final tax return. This will represent tax of approximately $225k.
If on the other hand the maximum $200k is rolled into John’s RDSP this means only $300k would be taxable to Sarah. This represents tax of approximately $135k
This means there is a tax savings of approximately $90k and John’s RDSP gets fully funded.

25. Impact on Social Assistance Benefits
Payments from an RDSP do not impact other income-tested federal government programs, including:
Old Age Security (OAS)
Guaranteed Income Supplement (GIS)
Canada Pension Plan (CPP)
The Goods and Services Tax Benefit (GST Benefit)
Social assistance benefits.
The RDSP does not count toward the income test benefits of the following federal benefits.
With respect to provincial benefits, it is an exempt asset for the asset test for provincial benefits and the income is exempt from the income test of most provincies.

26. Death of the beneficiary
RDSP will be collapsed
CDSGs and CDSBs received in last 10 years will have to be repaid
Net proceeds to estate of beneficiary
Under beneficiary’s will or
If no will, through provincial rules
Tax on proceeds included in final tax return
When the beneficiary passes away the RDSP must be collapsed by Dec. 31st of the year following the death of the beneficiary.
If grant/bond has been deposited to the account in the 10 years prior to death it will need to be repaid to the government.
The balance of the account (including growth) will be paid out to the beneficiary’s estate.
If the beneficiary has a will it will be distributed as per the will, if they do not have a will it will the distribution of the account will follow the rules of intestacy in the province the beneficiary resided.

27. Tie in to Henson Trust – Another way to save
$200,000+ available to be set aside
RDSP and/or Henson (Discretionary) Trust
Not available in Alberta
What do you advise?
Impact on Social Benefits
Rollover available
Mackenzie Strategy Lab – “RDSP, Henson Trust or TFSA?”
The RDSP pairs well with a Henson Trust, especially if you or your disabled family member are left an inheritance that s greater than $200,000. The RDSP can shelter up to $200,000, but over that amount you may need to consider a discretionary trust, known as a “Henson” trust. When considering this, there are several factors that must be addressed to ensure you get the right mix of accounts. Those factors include government benefits that may be lost or be clawed back and if health benefits will be affected. Your ability to move assets to “exempt” savings vehicles like the RDSP and the Henson Trust can ensure that costly health benefits are retained as much as possible. The reason we look at both of these types of accounts is because the rollover is available for both of them.
We have a white paper that compares the RDSP a Henson Trust and a Tax-Free Savings account, all of which provide savings on a tax-reduced basis to protect social benefits. Each has pros and cons.

28. Other Considerations Life insurance
Transfer of non-registered investments
Will planning
Powers of Attorney planning
Financial planning
Charitable Giving
You may want to speak with your financial advisor about the following things. Now that you have an account with assets in it you may want to consider having a will and powers of attorney drawn up for you.
If you don’t have anyone you would like to leave your account to you may want to consider charitable giving.

30. Disclaimer
Date of approval: November 2017.
The content of this presentation (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. This should not be construed to be legal or tax advice, as each client’s situation is different. Please consult your own legal and tax advisor.
This is our standard disclaimer. We are not here to replace advice you might receive from lawyers, accountants or any tax professionals. We are simply here to provide you with information to help you in your discussions with these indiviudals.