"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things."

~ Niccolo Machiavelli, historian and writer

Monday, February 23, 2009

RDSP Chit Chat

PLAN should at least be happy to see that the RDSP seems to be generating a lot more on-line interest, the number of Google searches seem to be increasing every day.

So now that the RDSP is finally a viable option for the disabled community in Nova Scotia, I thought I would pass on a few more interesting tidbits.

  • We already know that the Bank of Montreal and the Royal Bank are on board. It is hoped that CIBC will be next, hopefully by the end of February.

  • In regard to the necessity of the beneficiary of a RDSP being approved for the Disability Tax Credit, remember that you can set up the RDSP prior to being approved for the Disability Tax Credit, provided that you become approved for the DTC in the same year that you set up the RDSP.

  • Lest we forget yearly Income Tax returns must be filed in order to leverage the government Bond and Grant. If the beneficiary is 19 years of age or over, it is their Income Tax returns that must be filed. If they are under the age of 19, it is the family's Income Tax Returns which will decide how money monies the federal government will pay the RDSP.
    But that doesn't meant that you shouldn't go ahead and set up your RDSP now. Go ahead and then once your Income Tax return is filed sometime in the next few months, that will leverage any government monies you are entitled to. Just remember, you must continue to file your Income Tax returns in order to be eligible for the Grant and Bond on a yearly basis.

  • It's also important to realize (and I must confess that I hadn't) that you can go ahead and open a RDSP without putting any money in. That's right, a zero dollar account. Which (depending on the beneficiary's or their family's income) could still leverage the annual government bond of $1,000. You read that right, open a RDSP without putting a penny in and (depending on your income) the government may still give you free money every year.

  • One very important point - if you open a RDSP on behalf of your disabled child who is under the age of majority, you, as the parent can continue as holder of the plan after the beneficiary reaches the age of majority. At which time, the beneficiary may be added to the RDSP as a joint holder if they so wish.

    As opposed to the situation when a RDSP is opened for a disabled adult, in which case, the beneficiary is the only one qualified to be a holder of the plan. Which gets you into issues of the competency of the beneficiary.

    Because remember that as a parent of disabled adult, you have absolutely no legal say or input into that adult's life. Unless of course you have guardianship. And although you may still want to seriously consider guardianship for other purposes, at least if the RDSP is opened while the beneficiary is still a minor child, you won't have that to worry about.

    So if you've been thinking of opening a RDSP for your minor child, you might want to seriously consider doing it now and not waiting until they become an adult. Not only will waiting cost you years of potential government money but you might well find yourself in a situation where it is very difficult to be able to even open the RDSP.

    Because if your adult child is not considered contractually competent to open a RDSP, then you, as as their parent, may only open a RDSP on their behalf if the plan is opened as a result of a transfer from another RDSP under which the disabled adult was named as a holder; or if you, as the parent, are legally authorized to act on behalf of the beneficiary (meaning you have guardianship).

  • On a closing note, I find that a lot of people tend to be confused about some of the details of how a RDSP works, in particular the Canada Disabilty Savings Grant and the Canada Disabiltiy Savings Bond. There also seems to be some confusion around the fact that when any money is withdrawn from the RDSP, any government grants and bonds received in the previous ten years must be repaid to the government.

    Oh, the things I do for you. This page gives a fairly clear explanation of the Canada Disability Savings Grant and how much of it your RDSP will be eligible for. Likewise, this page for the Canada Disability Bond. And this page should cover off any questions you may have concerning the extension of the deadline for 2008. Any additional outstanding questions, hopefully, will be answered here.

    But if you read all that and find that you're still stuck, drop a comment or post me an email (just click on the See My Complete Profile link on the top of the sidebar to find the email address) and I will see what I can do.

Happy Planning!

Update: Say it and it shall be so!
CIBC has signed up as the third financial institution to be offering the RDSP to Canadians.

4 comments:

Audrey said...

Hi Michelle,

I would have e-mailed this to you, rather than post a comment to an older post, but I can't find your e-mail address on your profile.

I'm wondering about Power of Attorney as a means of representing my adult son, both for the purposes of setting up an RDSP, and handling other financial/legal matters on his behalf. I've talked to my lawyer about this, and she's met my son, and she feels it might be possible for her to do up a plain-language P of A that she was satisfied he understood and could sign. Any thoughts? Do you know of anyone who's done this? It seems to me it would be simpler and cheaper than a guardianship application, and would not remove my son's right to act on his own, where he is able to.

MMC said...

A few thoughts - in my mind, a POA is a very good choice provided two conditions are met.

First, the person has to be high functioning enough to be competent to make one. I tend to think that if a person is capable of executing a valid POA then they probably don't need guardianship in the first place. But that's because I tend to think the standard of competency required to execute a POA is the same as the legal standard of competency across the board, the same as the standard to be able to enter into a contract, for example. But it I have come across a few lawyers who seem to think otherwise, that as long as the person has the ability to understand what they are signing, it is okay. In all honesty, I'm not really sure on that point.

The other thing to watch out for is this, if you don't have guardianship that means your son is going to be opening the RDSP in his name. I don't think a bank is going to allow you to walk in with just a POA and open one of these, you will likely have to bring your son with you. Which is fine as long as your son appears high functioning enough to not cause the bank any concerns. But if he comes across as too challenged, then a savvy bank rep is going to question both his competency to open the RDSP and the validity of your POA.

One more thing to keep in mind - if a person is capable of granting a POA, they are equally capable of revoking it. Which means that you want to be aware that down the road, your son would be allowed to legally change his mind and revoke the POA. As long as you recognize and are prepared for that possibility, then it's okay.

Since a POA only covers financial matters, if you go this route, you might (or might not) want to consider also having your son sign some form of personal directive, as well. This would allow you to make decisions for your son around issues of medical care and personal care, for example, with respect to residence, care and services, and matters of comfort. You can find the legislation here. Although in my mind, the same standard of competency as would be required to execute a POA would be requried to make a personal directive.

Audrey said...

Thanks, Michelle, those are all good points to consider.

My lawyer seemed to be saying that as long as she was satisfied that my son knew what he was doing in assigning me POA, then it would be legal, hence the need for a plain-language version (sort of like the Representation Agreement in BC, except more limited in scope). I think my son is in that gray area where I could have trouble getting guardianship, because he is very verbal and can certainly make his wishes known, but there are areas in his life, like money and legal matters, where he simply can't manage on his own. Health issues are another concern, so a personal directive is a good suggestion.

I have already set up an RDSP with him as beneficiary and me as plan-holder, even though I am not his legal guardian. The govt. website says the plan-holder must be "a guardian, tutor, or curator of the beneficiary, or an individual who is legally authorized to act for the beneficiary". Since my son has assigned me as his representative for dealing with Revenue Canada, and the RDSP is a Rev.Can program, I interpreted this to mean that I was legally authorized to act for him. The bank (BMO) did not have a problem with this, and accepted me as plan-holder. I called Rev.Can. to confirm that this would be ok, and they basically said to set it up this way if the bank was willing, because Rev.Can. knew it was a problem and would eventually come up with a solution that would allow parents to be plan-holders for their adult non-contractually-competent children, and I could further legitimize what I'd already done, once there was a mechanism for doing so. In the meantime, I'm considering POA as another means of bolstering my position that I am legally authorized to act for him.

The RDSP is a great program, but they really could have made it a little easier for us to implement.

And yes, I am concerned that my son could revoke his POA at some future date, especially if he came under the influence of somebody who persuaded him to transfer it to him/her. But in a situation where I'm not sure I could get guardianship anyway, POA (and personal directive) may be my only options, if I want to be able to continue to help him through life.

MMC said...

I'm coming to the conclusion that as long as you have two drs willing to back you up, you most likely will be successful in geting gaurdianship even if your child is fairly high-functioning.

I expect to be in the same position myself in a few years with my oldest daughter. She is very verbal and very capable of making her wishes known but as far as I'm concerned (and I am fairly certain her neurologist will agree) the problem is that she doesn't and won't have the ability to manage her money, keep herself safe and live independantly.

What I am trying to say is I don't think it can ever really hurt to try for guardianship if, in your opinion as the parent looking out for your child's best iterests, it is is warranted. If you can get two drs onside and as long as no one heads to court to object, I think chances are good you will be successful. And, if you're not, I don't see how you're really in any worse position than you were before.

But I do think the one thing to be careful about with a high-functioning individual is to how you present the guardianship application to them. To make sure you present it so they will see it as something positive (your parents will always be here to help you with those things you find difficult) as opposed to something negative.

Know what - this comment is getting long enough to turn into its own blog post, which I think I will try to do in the near future. So I will think I will just leave it like this for now.