On January 30, 2013, the BC Ministry of Social Development (MSD) clarified how payments out of an RDSP will be treated.
All provinces and territories have stated that money held within an RDSP will not affect disability income and programs, but not all regions have exempted the monthly or annual income coming out of an RDSP.
Of those that have exempted the income, not all provinces or territories have worked out the process of how this will practically work in terms of reporting. British Columbia has now detailed the process: All money coming out of an RDSP account, as well as purchases made with that money, are fully exempt from affecting any disability income or program in BC as long as it is documented the funds originated directly from an RDSP.
“Great news, indeed!” was the first response we heard from families when the news got out. This development confirms that people with disabilities in BC can save for their future and work to fulfill their own vision of a good life, without worrying about their disability income or benefits being affected.
At PLAN, we would like to see all jurisdictions in Canada exempt the RDSP as both an asset and income, and for each government to clearly state how these exemptions will work in practice.
For more information, excerpts from MSD’s Assets and Exemptions website are copied below.
Types of Assets January 30, 2013
Registered Disability Savings Plans (RDSP)
The ministry’s Registered Disability Savings Plan (RDSP) policy allows eligible clients to hold funds in an RDSP as an exempt asset and receive disbursements from an RDSP as exempt income. RDSP disbursements can be used for any purpose and do not impact eligibility for hardship assistance, income assistance or disability assistance.
RDSP disbursements are exempt as an asset. A disbursement from an RDSP remains exempt even if it is converted to a non-exempt asset. It is, however, the responsibility of the client to clearly document that the funds originated directly from an RDSP.
For example, a client withdraws money from an RDSP and keeps the funds as cash while the client shops for a non-exempt vehicle. Both the cash and the non-exempt vehicle could still be considered exempt provided the client clearly documents the origin of the funds used to make the purchase.
Any ministry client can set up an RDSP if they meet the federal government’s criteria. To meet the federal government’s criteria, clients must be under 60 years of age and must apply and be found eligible for the Disability Tax Credit. Not all PWD clients will qualify for the Disability Tax Credit as provincial and federal disability criteria differ.
Up to $200,000 can be contributed to an RDSP. The federal government provides bonds and matching grants for contributions to RDSPs. Clients may also be eligible for a $150 gift to their RDSP from the Vancouver Foundation’s Endowment 150 program.
Two types of disbursements are permitted from RDSPs: Lifetime Disability Assistance Payments and Disability Assistance Payments. Lifetime Disability Assistance Payments are annual lifetime payments and Disability Assistance Payments are lump-sum payments. The type of payments and the payment amounts depend on how much was contributed to an RDSP and when.
Eligible clients may choose to transfer newly received assets into an RDSP (or trust), to avoid being over the asset limit in subsequent months [see Procedures below].
Clients do not need to report RDSP balances or contributions from outside their family unit, but are required to report personal contributions, contributions from their family unit, and disbursements. [see Procedures below]
Registered Disability Savings Plan (RDSP) – Reporting: January 30, 2013
- When a client reports an RDSP or RDSP activity, supporting documentation must be provided.
- Once supporting documentation is verified, set the RDSP indicator on the Assets Type tab.
- When a disbursement has been received and is now an exempt asset, create an End Date (you can use the current date). This will create the exemption for the asset. Note the asset in asset comments.