Thursday, April 30, 2015

The 2015 Budget: Registered Disability Savings Plan

A Registered Disability Savings Plan (RDSP) is a savings tool intended to assist individuals who qualify for the disability tax credit.  The disabled individual and friends and family of the disabled individual can set aside up to $200,000 in a special tax-deferred account for the future use of the individual.

If the disabled individual is an adult, the disabled individual is the holder of the RDSP.  However, concern was expressed that some disabled adults might not have sufficient mental capacity to enter into a plan contract.  In order to deal with this issue, the federal government introduced rules in 2012 that allowed qualifying family members to become the plan holder on behalf of the disabled individual.

Capacity to enter into a contract is a provincial responsibility.  The 2012 rules were intended to be temporary rules in the expectation that the provinces would enact legislation that would address the capacity issue.  In British Columbia, for example, the Representation Agreement Act allows for the appointment of a trusted person as the legal representative of a disabled individual even if the disabled individual would not normally be considered to have the capacity to appoint someone as a power of attorney.

As not all provinces have yet addressed this issue, the federal government is extending the 2012 rules.  Instead of expiring at the end of 2016, the rules will continue to apply until the end of 2018.  Additionally, a qualifying family member who becomes a plan holder before the end of 2018 can remain as the plan holder after the end of 2018.

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The above article provides general commentary of an educational nature. It does not constitute advice for any specific person or any specific set of circumstances. Because circumstances vary, readers should consult professional advisers in order to obtain advice that is applicable to their specific circumstances.