BMO RDSP Resource Centre
The RDSP application process can be a time consuming and complicated endeavor for both advisors and clients alike. In fact, RDSP applications are responsible for the vast majority of processing errors we encounter. An application that contains an error or missing information – a very frequent occurrence – means restarting the process from scratch. Not only does this lengthen the time to completion, but since the government only reviews accounts for funding on a periodic basis, this postpones things even further, resulting in long delays before accountholders receive their grants and bonds.
We want to make it easy for you and your clients to complete this process and help get accounts funded as soon as possible, and that’s why we are pleased to introduce the BMO RDSP Smart Form – a new tool designed to simplify the Registered Disability Savings Plan setup.
The BMO RDSP Smart Form streamlines the application process, reducing the complexity and time involved to set up and fund an RDSP. And because it guides you through each step – personalized to your client’s unique situation – it means leaving the guesswork out of it.
Upon completion, this tool will provide you with printable forms ready for signatures, including the BMO and government forms required to successfully open and register an RDSP, such as:
- BMO RDSP Application Form
- Application for Canada Disability Savings Grant and/or Canada Disability Savings Bond (EMP5608)
- Joint Holder (EMP5609: Annex A) – if applicable
- Primary Caregiver (EMP5610: Annex B) – if applicable
More RDSP resources from BMO:
- RDSP Brochure English and Chinese
- RDSP Guide English and Chinese
- RDSP Insert English and Chinese
- RDSP Presentation English and Chinese
What’s an RDSP?
The Registered Disability Savings Plan (RDSP) is a tax-sheltered plan created by the federal government to help people with disabilities build long-term financial security.
What are the advantages of an RDSP?
For the beneficiary of an RDSP, there are three big advantages. Earnings grow tax-free, so your savings grow faster. RDSPs are also eligible for government incentives, up to $70,000 in grants and $20,000 in bonds. And payments to a beneficiary from an RDSP do not affect income-tested programs like Old Age Security, the Guaranteed Income Supplement and the Canada Pension Plan.
What is the disability tax credit?
The disability tax credit is a federal income tax credit for people with disabilities and people who support them. It was created to help offset some of the unavoidable expenses unique to those with severe and prolonged impairment. A list of maximum credit amounts for previous years can be found here.
Who’s eligible for an RDSP?
Anyone who’s eligible for the Disability Tax Credit can be the beneficiary of an RDSP. To qualify you need to be a Canadian resident, have a valid Social Insurance number, and be under 60.
To be eligible for Disability Tax Credit, you must complete a Disability Tax Credit Certificate, Canada Revenue Agency (CRA) Form T2201, with the assistance of a qualified professional, and receive approval from CRA.
Tip: to help your money grow faster, consider setting up automatic RDSP contributions at regular times throughout the year.
Are RDSP contributions tax deductible?
No, contributions to an RDSP are not tax deductible. But when those contributions are paid out to the beneficiary they won’t count as income.
What government incentives is an RDSP eligible for?
There are two government incentives available through RDSPs. The Canada Disability Savings Grant can add up to $3,500 a year to a lifetime maximum of $70,000. The Canada Disability Savings Bond can add up to $1,000 annually to a lifetime maximum of $20,000. So that’s a great incentive for starting a plan early!
Is there a contribution limit?
There’s no annual contribution limit for an RDSP. The lifetime maximum for a beneficiary is $200,000.
How long can I contribute to an RDSP?
Good question. You can contribute until the end of the calendar year in which the beneficiary turns 59. Government incentives can only be received up to the end of the calendar year in which the beneficiary turns 49.
How do RDSP withdrawals work?
A beneficiary can access funds from their RDSP by either annual payments (Lifetime Disability Assistance Payments) or occasional lump sum payments (Disability Assistance Payments). These payments can be used for any purpose. Income tax doesn’t apply to the original contributions, only to investment earnings, rollover amounts, grants and bonds.
There are a few rules that apply to RDSP withdrawals. Beneficiaries should plan to earn all their grants and bonds 10 years before they start drawing an income, because any grants or bonds received in the 10 years preceding withdrawals or payments must be repaid to the government. Lifetime Disability Assistance Payments can begin at any time, but have to start by the end of the calendar year in which the beneficiary turns 60.
To find out more about RDSP payments and rules, check the Government of Canada website.
* As compared to an investment that generates an equivalent amount of interest income.
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