Saving for Children with Disabilities | Kerr Financial
Financial Planning
Saving for children with disabilities
Category: Financial Planning

If you have a child who is disabled there are several strategies available to assist with building resources for their future and for providing protection. With regards to building resources, we have outlined a few considerations below.

The Canada Revenue Agency (CRA) provides a non-refundable tax credit called the “Disability Tax Credit” for individuals with severe and prolonged impairment in physical or mental functions. Applying for the disability tax credit requires a qualified practitioner to complete an application form which addresses several areas of everyday life including hearing, elimination, and mental functions for everyday life. The CRA reviews the application and makes a determination, which, if successful; results in eligibility for the disability tax credit. The tax credit can be transferred from a dependent to another taxpayer (such as a parent) provided it is not needed given the individual’s taxable income.

Once an individual is approved for the Disability Tax Credit they would then be eligible to be the beneficiary of a Registered Disability Savings Plan (RDSP) (discussed below), in addition, could look at claiming tuition and tutoring fees (if any) as medical expenses. In order to make this claim, the CRA requires certification in writing by an appropriately qualified person (doctor) that the individual requires “the equipment, facilities or personnel specially provided by that school” for the care and training of the patient.

An RDSP, as referred to above, was developed to be a registered savings plan for individuals with disabilities. This helps parents and others save for the long-term financial security of disabled individuals. RDSPs can receive contributions and contribution matching from the Government, depending on contributions made by the family and the income level of the beneficiary (if age 18 or over). Canada Disability Savings Grants will make matching contributions of 300%, 200%, or 100% of amounts contributed up to an annual maximum of $3,500, depending on income and a lifetime maximum of $70,000. In addition the Government will pay Canada Disability Savings Bonds into an RDSP up to an annual maximum of $1,000 and a lifetime maximum of $20,000; no contributions are needed to receive these bonds. Both the grants and bonds are income tested based on the income of the beneficiary, which is based on the family income when the beneficiary is a minor and the beneficiary and their spouse’s income when the beneficiary is of the age of majority.

Parents or other guardians can establish RDSPs as plan holders if the beneficiary is considered not capable of entering into a contract. Grant funds must remain in the plan for 10 years otherwise they must be repaid to the Government. Contributions can be made to RDSPs up until the end of the year in which the beneficiary turns 59. There is no annual limit to contributions to an RDSP but there is a lifetime contribution limit of $200,000.

Talk to your financial advisor regarding what programs or credits you and your family may be eligible for in order to make the most of the available resources.

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Kerr Financial Group was formed in 1979 for the purpose of assisting individuals to maximize their personal financial resources, alleviate their financial and retirement concerns and simplify the administration of their affairs.

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