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.

Are You Missing The Boat Too?

I came across an interesting article in today's Chronicle Herald concerning how many parents in Nova Scotia don't make use of RESPs (Registered Education Savings Plans). Around 68.2 per cent, apparently.

That would be 68.2 per cent of Nova Scotia parents who not only lose out on a tax-free vehicle for saving money for their children's education but also potentially lose out on the Canada Education Savings Grant and Canada Learning Bond.

The savings grant could add as much as $9,200 from the federal government over the life of the plan.

"Effectively, you get $20 for every $100 you put into your savings program," Mr. Lewis said.

The federal government began offering the savings grant in 1998, "as an incentive to encourage more families to save," he said, while the Canada Learning Bond was introduced in 2005 as a supplement for families whose annual incomes fall below about $37,000.

"The government looked at the program and (decided) . . . that there’s value in engaging families in planning for a higher education, regardless of what your income is, from the time your kids are young," Mr. Lewis said.

The learning bond isn’t a matching grant, he said, but provides parents with $500 to start an RESP in the year their child is born, with $100 added each year until the bond tops out at $2,000. Children who are eligible for both grants could receive $9,200 from the federal government for their RESP.

Which got me to thinking about what percentage of Nova Scotia families with a disabled child might be losing out, too. Dollars to donuts (or perhaps books and meal plans, to say nothing of the cost of tuition), the disability community is highly over-represented in that 62.2 per cent. I fear too many of us are likely still caught in that "it's not for our child(ren)" mindset that intuitively tells us that a RESP would be a waste of money for a child with a disability.

But as we've discussed before, that's far from necessarily so. As it turns out, we purchased RESPs for both our children long before we were aware of their disabilities. But given the government grants (read free money added to the fund by the government), the guarantee that at least some, if not all, of our capital will be returned if our children do not go on to post-secondary education and the fact that most, if not all, of such funds are also transferable to another eligible child, I'm not too concerned.

And when I consider the advances that are being made in making post-secondary education more accessible to our children, be they challenged physically or mentally, I am actually quite hopeful that our daughters will be able to put those RESP funds to use to further their education.

So you might just want to take another look at those articles at Ken Pope's site concerning The Long Term Benefits of RESPs and Using Registered Education Savings Plans For a Child with Developmental Disabilities. After all, you wouldn't your child to be among those losing out, would you?

** A financial advisor, I will never be. So just as the advice on this blog can't be taken as 'legal advice', neither can it be taken as 'financial advice". It can, however, in good stead be taken as practical, common sense advice from one parent to another. That being said, however, do do your own research and meet with a financial advisor, if practical.

What Good Is A RESP To Our Child?

I really need to dig into my black bag (don't ask; it's a perfectly legitimate and explainable reference but just don't ask) to get moving on some new topics but unfortunately work and personal commitments make that just not feasible at the moment.

But in the meantime, I offer you these little gems I dug up at Ken Pope's site today:

The Long-term Benefits of RESPs

and

Using Registered Education Savings Plans For a Child with Developmental Disabilities

That's right, RESPs for our children with disabilities.

These days, with more changes occurring both with RESPs themselves and in post-secondary education, RESPs are looking like much better investments for the disability community. In the above articles, Mr. Pope notes the government grants (that's free money added to the fund by the government) available and the guarantee that at least some, if not all, of your capital will be returned if your child does not go on to post-secondary education. In addition, most, if not all, such funds are also transferable to another eligible child. And you might just be pleasantly surprised (I know I was) to see the advances that are being made in making post-secondary education more accessible to our children, be they challenged physically or mentally.

For example, I have attended numerous disability workshops over the past couple of years where representatives of the Nova Scotia Community College and Acadia University have made presentations concerning their services for students with disabilities. In fact, I probably could and will, at some point, do a series of posts just on that subject.

But I was quite impressed to find that the NSSC, for example, offers both 'accommodations' (allowing a student to graduate with a regular diploma) and modified programs [similar to the idea of the Individualized Program Plans (IPPs) offered in the public school system] which would allow even some IPP students to attend Community College and 'graduate' with a 'list employment skills'.

We purchased a RESP for our oldest child before we knew she had any disabilities. And there's been times over the years that I've wondered in passing if we were just throwing our money away. But now, not only do I know that I can transfer those funds to my younger child, if need be, but I actually hope that the oldest might just be able to access some form of post-secondary education. Only time will tell if that hope is realistic. But either way, I'm glad now that we kept up with the RESP.

And if you're looking for more reading material on other disability-related topics, a list of other articles from Mr. Pope's site can be found here.