What is Canada Disability Savings Grants (CDSGs)
Disability Savings Grants for Canadians - (CDSG) - The Canada Disability Savings Grant is a matching grant that the Government will deposit into your Registered Disability Savings Plan (RDSP) to help you save. The Government provides matching grants of up to 300%, depending on the amount contributed and the Beneficiary's Family Income. The maximum grant is $3,500 each year, with a limit of $70,000 over your lifetime. Grants are paid into the RDSP until the end of the calendar year in which you turn 49 years old. You must apply for the grant at the Financial Organization where you have your RDSP.
Whenever I meet a family with disability, there's always the question: "What is the difference from putting our money into regular saving account versus into a RDSP" The major advantage is that the Government of Canada will provide the Canada Disability Savings Grant (CDSGs) and the Canada Disability Savings Bonds (CDSBs). We first go through the CDSGs for now and discuss the CDSB at a later date.
CDSGs are matching grants that our Government will put into a beneficiary's RDSP to assist savings. It could be as much as up to 300% of the deposit, depending on the contribution amount and family net income.
The figures below outline 2012 CDSG matching rates:
For Family net income: Up to or equal to $85,414
For Family net income: Over $85,414
Figures are obtained from the Mackenzie Investment's website.
For a minor beneficiary, the family net income is that of his or her parents. Whereas the beneficiary is over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable. The income threshold is indexed annually to inflation.
CDSGs are subjected to a lifetime maximum of $70,000 for each beneficiary, and are payable until the end of the year that the beneficiary reaches age 49, given the beneficiary remains a Canadian resident.
Beginning of 2011, unused grant can be carried forward for a 10 year period. (Starting from 2008, the year RDSP was launched.)
There are no annual contribution limits, contributions of up to $200,000 can be made in any given year. However, when a lump sum of $200,000 is made, no CDSG would be paid after the first year. Therefore, periodic contributions might be a better option, especially, if one wants to maximize the grants and bonds from the government. Of course, it would also depend on the expected rates of return, age of the RDSP beneficiary and cash flow needs. Make sure you talk to a financial professional before you make any decision.
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