Community Living Ontario

Community Living Ontario, in conjunction with Autism Ontario and the PLAN Institute for Caring Citizenship, has entered into an agreement with Human Resources and Skills Development Canada (HRSDC) to provide outreach to people who have a disability and their families to help them learn about and apply for the Registered Disability Savings Plan. The agreement calls for both public information sessions and one-on-one assistance and support.

This service will be provided on our behalf primarily by Brendon Pooran, a lawyer in Toronto who is a member of the Board of Community Living York South. Brendon has immersed himself in the complexities of this federal government program that is almost too good to be true. Those who qualify for the Disability Tax Credit under the Income Tax Act, who have low incomes and can still scrape together $1,500 each year from their own resources or those of family members, will have their contributions topped up by federal grants and bonds totaling $4,500.

The funded outreach project is timely. Contributions for 2009 will have to be made by December 31st. Last year, an extension to March 2, 2009 was permitted because the banks were not prepared to receive applications by the end of the year. The plan only got off the ground on December 1st last year.

One of Community Living Ontario’s objectives in carrying out this project is to collect information about the most troubling aspect from the perspective of those who advocate on behalf of persons who have an intellectual disability. Whereas parents or other interested persons can open an RDSP for those who have not reached the age of 18, once they have reached that age they can only open a plan themselves, if they are deemed to be “contractually competent”. Otherwise, a parent or sibling can open a plan for them if they are “legally authorized” to act on behalf of the person who has a disability. This may lead to parents applying for guardianship of their adult sons and daughters.

At its 2009 Annual General Meeting, Community Living Ontario adopted a resolution that says the Association favours a supported decision-making approach that would enable adults who have an intellectual disability to exercise their legal capacity to open and administer an RDSP with the support of a family member or advocate. The HRSDC project will enable us to gather information that can be used to support the legal recognition of the validity of that resolution. The Canadian Association for Community Living has been lobbying the federal government to adopt rules that would give people the option of using supported decision-making in the RDSP process.

Starting in 2008, the Federal Government has introduced a “Registered Disability Savings Plan” (RDSP). The purpose of this program is to enable families and individuals with disabilities to accumulate a financial nest-egg to relieve the person of the poverty that very often accompanies having a disability. The Federal Government will promote the use of RDSPs for long-term savings by making its own generous contributions that must be left within the plan for at least ten years. The nature and conditions of these federal contributions is outlined below.

• The RDSP is basically modeled on the Registered Education Savings Plan, although there are several distinctions, such as the rules governing withdrawals, which will be outlined below. An RDSP can be established when the beneficiary is of any age, but contributions cannot be made after the end of the year when he or she becomes 59 years old. Money can be contributed to an RDSP by or on behalf of anyone who qualifies, both initially and on an ongoing basis, for the Disability Tax Credit under the Income Tax Act of Canada. Only one RDSP will be permitted for each individual.
• Contributions to an RDSP can be made by anyone, but the person who establishes the plan, who is referred to as its “holder”, has to approve the contributions made by anyone else. A plan can be opened by a parent of a child with a disability who is under the age of 18. Once the child becomes an adult, he or she can open their own plan if they are “contractually competent”. If they are deemed not to have such personal capacity, then a plan can be opened for them by someone who is “legally authorized” to make such a financial decision on their behalf. Parents are not “legally authorized” to make financial decisions involving the property of their adult sons or daughters unless some legal process, such as the granting of a power of attorney by the individual, or court-ordered guardianship of property, takes place. Efforts are being made to extend the notion of legal authority to include arrangements that involve supported decision making, as opposed to substitute decision making.
• Contributions to an RDSP are not deductible for income tax purposes, but once they are in the plan, the income they earn is not taxable. When money is withdrawn from an RDSP, whatever portion of the money withdrawn is made up of government contributions and interest or capital gains earned on the entire principal, will be taxable as the income of the beneficiary of the plan. The tax on these amounts is not likely to be very substantial if the beneficiary’s earning potential is quite limited.
• Contributions can be made in any amount in any given year, subject to a $200,000 lifetime limit on total private contributions. In consideration of the federal matching contributions only applying to the first $1,000 to $1,500 of private contributions each year, it is probably advisable to stretch out the private contributions over several years, rather than making large lump-sum contributions. Once a contribution is made, it is not refundable to the contributor. The funds must be used for the beneficiary, and if any amount is left over when the beneficiary dies, it will become part of his or her estate. Keep in mind that some people who have an intellectual disability will not be capable of making a will, so their estate will be distributed according to provincial statute law on inheritance where there is no will.
• Once an RDSP is set up, it will be eligible to receive additional funds from the federal government, based on the family or individual income and the size of the personal or family contribution. These government contributions will be in the form of a Canada Disability Savings Grant (CDSG) and (in the case of low income families) a Canada Disability Savings Bond (CDSB) in each year up to the end of the year in which the plan beneficiary turns 49 years of age.
• The size of the Disability Savings Grant is based on net family income. If the total net annual income is equal to or less than $75,769, the Government of Canada will contribute $3 for every $1 of the first $500 contributed privately. The CDSG will be reduced to $2 for each $1 of the next $1,000 contributed. Thus, if the person and/or the family contributes $1,500, the government will contribute the maximum grant in any one year of $3,500. For families with net incomes greater than $75,769, the CDSG will be reduced to $1 for every $1 of contributions, up to a maximum of $1,000 per year. The total lifetime Canada Disability Savings Grant will be capped at $70,000.
• The Canada Disability Savings Bond (CDSB) is intended for families or individuals whose net income is equal to or less than $37,885. The maximum CDSB will be $1,000 per year for persons who have an RDSP and whose incomes are below $21,287 per year, regardless of whether they make contributions or not. The amount of the CDSB will be reduced by a graduated formula, beginning at the $21,287 per year income level, that brings the Bond down to zero when the upper end of the income range ($37,885) is reached. The lifetime total of Disability Savings Bonds contributed by the government will be $20,000. If low income individuals or families are able to scrape together their own contribution to the RDSP, the plan will receive both the CDSG and the CDSB at the rates shown above. It is important to realize that an Ontario Disability Support Plan (ODSP) recipient (being over 18) who is eligible for the disability tax credit and who has an RDSP will automatically qualify for the CDSB, probably at the maximum level of $1,000 per annum.
• The income benchmarks given above are for 2008. These figures will be adjusted for inflation in successive years.
• “Family income” for those under 18 years of age includes the combined incomes of the person him or herself (if any) and of the parents. Once the beneficiary of the RDSP becomes an adult, then only his or her income (and that of his or her spouse or partner, if they have one) is counted – not that of the parents – even if the person continues to live in the parental home.
• The RDSP program is intended to be a long-term means of pro viding supplemental financial support to persons with disabilities. To reinforce that concept, the rules state that all of the government’s matching contributions to the RDSP (whether CDSGs or CDSBs), plus the interest earned by those contributions, will revert to the government if withdrawals are commenced less than ten years after the last such matching contributions were made. It is therefore highly recommended to establish an RDSP, if possible, while the beneficiary is still quite young, so that the government’s matching contributions will be maximized, and then to allow a further decade to elapse before the withdrawals begin. In order to maximize the matching contributions from the federal government, a period of twenty years for deposits is contemplated, followed by an additional ten years to lock in those contributions. Additional private contributions can be added on during those final ten years before disability assistance payments begin, subject to the $200,000 lifetime maximum total of such contributions.
• Payments to the beneficiary from the Plan can commence at any time, but bear in mind the loss of the entire federal contributions if withdrawals are made before ten years have elapsed since the last such contributions were deposited in the plan. Withdrawals will be known as “disability assistance payments”. They must begin no later than the year in which the beneficiary turns 60. Once started, they must continue on an annual basis and at a rate to be determined by formula. Income tax will be payable by the beneficiary on the portion of the withdrawals comprised of government contributions and interest at the tax rate applicable to the beneficiary of the RDSP, which is likely to be minimal, on the assumption that the beneficiary will not have a substantial taxable income from other sources.
• The Ontario Government announced on November 30, 2008 that having an RDSP will not trigger the application of the income and asset rules under the Ontario Disability Support Program in determining the person’s financial eligibility for full ODSP (or Ontario Works) income support benefits.
• Parents and other family members of persons who have an intellectual disability must bear in mind the question of whether the individual will be deemed capable of opening an RDSP (if he or she is an adult), and of handling the fairly substantial disability assistance payments they will receive once those payments commence down the road. Unlike a Henson trust (described elsewhere on this website), the RDSP and its proceeds are the property of the person who has a disability, and must be dealt with in a manner that satisfies the legal standard of competent substitute or supported decision making.