Parents of disabled children carry the added burden of saving for their child’s future. A friend recently mentioned her fears for her disabled daughter and I vaguely recalled reading about helping parents of disabled children in the Budget 2007 document. In its last budget, the Federal Government unveiled a plan to create the Registered Disability Savings Plan (RDSP) this year. Modelled on the RESP, contributions to the RDSP are not tax deductible but attract matching grants in the form of a Canada Disability Savings Grant (CDSG). The growth of investments within the RDSP is not taxed but when withdrawn, the grants and investment gains within the plan are taxed in the hands of the beneficiary.
The CDSG matches the RDSP contribution at 100%, 200% or 300% depending on the family’s net income (i.e. gross income less RRSP contributions, child-care expenses etc.) and the amount contributed for a maximum of $3,500 per year. For example, a family with a net household income of about $75,000 can contribute $1,500 to their child’s RDSP and get the maximum CDSG of $3,500. Families with net income above this threshold can get a matching of 100% when contributing up to $1,000.
Low-income families can establish a RDSP and receive a Canada Disability Savings Bond (CDSB) of $500 or $1,000 per year, even if no contributions are made. There are lifetime limits to how much can be contributed to the RDSP and how much can be received from the CDSG and CDSB.
You can learn more about this program in last year’s Budget document. The CRA website mentions that the plan would come into effect “as soon as possible in 2008”.
