What Is The Registered Disability Savings Plan?
Growing up with a physical or mental impairment might jeopardize your financial well-being or even survival. Keeping this in mind, In the year 2007, the Federal Government of Canada has created a unique savings plan known as the RDSP (Registered Disability Savings Plan) to assist such individuals financially. In this article, we are breaking down the details about this plan for your understanding.
What is RDSP & what are the RDSP Features?
RDSP stands for Registered Disability Savings Plans. It is essentially a long-term savings plan for disabled people.
- The scheme is tax-deductible, and anyone can join in making contributions.
- The amount put in the plan can grow with no tax deductions.
- Invest in the plan until the recipient is 59 years of age.
- In a tax-deferred account, the policyholder can invest up to a limit of $200,000 on behalf of the beneficiary.
- The beneficiaries are at complete liberty to spend their money as they see fit, with no limits imposed by the federal government.
Who Can Open an RDSP?
- If the person has reached an age of majority, then that person or their legal guardian can open an RDSP.
- If the individual is a minor, then somebody like his guardian, Legal parent, agency, or Institution can become their representative by becoming a plan holder of that person.
Who is Eligible for an RDSP?
To join the RDSP, you must meet the following prerequisites.
- If you are qualified to get a Disability Tax Credit, you are automatically eligible for an RDSP.
- One should be a Canadian resident with a Social Insurance Number.
- One should be under 60 years old.
Experts recommend setting up an automated RDSP contribution since it makes money grow at a faster rate.
How Do RDSP Beneficiaries Receive Payments?
There are only two methods by which the beneficiaries receive their RDSP payments.
1. Annually (Lifetime Disability Assistance Payments)
This form of payment can begin at any age for the beneficiary. But it must start at the end of the year when the recipient turns 60. It continues for the rest of their life.
2. One Time (Disability Assistance Payments)
Once you establish RDSP, the beneficiary can withdraw this sort of payment at any point. If you or your family member suffer a disability, it can put pressure on your financial situation. Therefore, this plan will help you and your family in those circumstances.
Registered Disability Savings Plan offers triple the value of the money deposited almost immediately, depending upon one’s income.
To summarize, it is therefore critical to enroll in this plan, but you must first understand the eligibility requirements. The prerequisites to check off if you wish to be a part of this strategy. If you thought this was a helpful post, do not forget to share it with your folks and let us know your thoughts and suggestions in the comments below.
