CIBC has also issued a report from Managing Director of Tax and Estate Planning, Jamie Golombek, outlining RDSP strategies for disabled Canadians and their families.
The RDSP is largely modeled after the Registered Education Savings Plan (RESP) with both grant and bond incentive programs. It is a new registered savings plan that allows Canadian residents eligible for the Disability Tax Credit, and in certain cases their parents and other eligible contributors, to invest up to $200,000 in a tax-deferred plan. As with RESPs, earnings and growth on all RDSP contributions accrue tax-deferred, contributions are not tax deductible and there are no annual contribution limits, only a lifetime limit.
"The RDSP is an effective way for clients with disabilities and their families to save for the future and make the most of government grants and bonds, all the while deferring tax on the plan's earnings and growth," says Golombek.
Canada Disability Savings Grants (CDSG) and Canada Disability Savings Bonds (CDSB) were designed to augment assets held within the RDSP. The Government of Canada will contribute funds, in the form of a CDSG, to a maximum of $3,500 depending on the net income of the beneficiary's family. The Government of Canada will also contribute up to $1,000 annually in CDSBs depending on the net income of the beneficiary's family.
Golombek discusses that prior to the arrival of the RDSP, trusts were the main vehicle used when planning for persons with disabilities. Fully discretionary trusts have been commonly used to set aside assets for a disabled beneficiary, including an inheritance, but still preserve the beneficiary's right to collect certain government benefits and entitlements.
Putting assets into an RDSP, instead of giving them to the beneficiary outright, will also protect against a beneficiary losing valuable disability benefits in most provinces, but RDSPs have the added benefits of saving money in a tax-deferred manner, while collecting CDSGs and CDSBs.
Reference: CIBC's RDSP product line-up includes a broad selection of CIBC Mutual Funds, including savings, income and growth funds, and CIBC Managed Portfolio Services. More information on the CIBC Registered Disability Savings Plan visit www.cibc.com or call 1-877-433-1901. CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world.