Interesting Questions

Update: Mulling over this idea of spending RESP funds only on educational expenses, I went back to Ken Pope to get further clarification.

His response was to suggest that a person would simply spend the funds for educational expenses over a longer period of time, as he believes the limits on how long one has to spend the funds has now been extended now to age 35. And because provincial benefits cover shelter and other costs that would normally be paid for from the RESP there is more to go around.

At the very worst, the RESP would be collapsed and the contributions and income given back to the parent, who would consider whether to roll some of into their RRSP or to receive it, pay tax, and then do things with what’s left.

To which I would add the caveats that I am unsure whether or not the age limits noted by Mr. Pope would vary between the different RESP products that can be purchased or whether this approach would work woth the Nova Scotia government. If anybody has more information on this issue, I would love to hear it.

I mentioned previously that some interesting questions had come out of the RDSP Information Session put on by Human Resources and Skills Development Canada.

The first question dealt with how the provinces would treat the RDSP (both from an asset and income point of view) in regards to such issues as home care and long term care (ie. nursing homes).

And the answer to that, frankly, is that we don't yet know.

Here's what we do know. We know that the Federal Government has exempted the RDSP for the purposes of receiving the Guaranteed Income Supplement (GIS) and Old Age Security (OAS). This means you can still receive money from GIS, OAS and the RDSP without causing any clawbacks.

That's the story on the federal level. Provincially, we know that Nova Scotia has come in line and declared that it will fully exempt the Registered Disability Savings Plan contributions when calculating clients' eligibility for income assistance and that clients will be able to withdraw funds from the Plan without affecting their income assistance payments. But that's income assistance and makes no reference to other provincial government benefits.

So as I said, we still need to determine how the provincial gov't will treat the RDSP (both income and asset-wise) when it comes to benefits such as home care and long term care (ie. nursing homes). And although for many such services may not become issues for some for many years down the road, for others, issues like home care eligibility are relevant right now. And either way, it's still an interesting issue to consider. One that needs an answer.

The second question that came up at the Information Session was how the provincial government might treat a disabled person's income from a Registered Educational Saving Plan (RESP).

I previously posted a bit on the issue of the appropriateness and effectiveness of RESPs for our children with disabilities. At which time I linked to an article by Ken Pope which touches on this issue, at least from the Ontario perspective.

RESP funds should only be used to pay for education-related expenses such as tuition, books and tutors. If a residential or meal plan comprises a component of your child’s program, it is very important that the plan not be paid with RESP funds. Similarly, RESP money should not be used to pay for things that are covered by provincial disability benefits, such as shelter, clothes or food. Separate paperwork should be kept in order, otherwise there may be a deemed overpayment of provincial disability benefits and a surprise claw back of “overpayments” due to simple misapplication of funds for the wrong use.

And although I have not yet queried the Nova Scotia government on their position in this regard, the logic here does make some sense.

I would think, at a minimum, that if a person hoped not to have their provincial disability benefits affected by payments from a RESP, it would certainly help build the case to use the funds only for educational expenses as opposed to daily living expenses. And to keep clear separate paperwork documenting that distinction.


Whether that will, in fact, be good enough and whether we can go beyond that are just two more questions for our provincial government to answer.