Financial Planning for People with Disabilities and their Families

1. Financial Planning for People with Disabilities and their Families Presented by: Troy Mulvey & Lisa Whittleton Financial Security Advisors Your situation isn’t typical –the advice you receive shouldn’t be either.

2. Disclaimer • The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice.  • Readers should consult with their own accountants and/or lawyers for advice on the specific circumstances before taking any action. 

3. A Solid Foundation for Financial Security Growth opportunities (real estate, speculative investments, family and business legacy) Controllable events (opportunities, recreation, retirement, savings, home ownership, debt elimination) Uncontrollable events (job loss, emergencies, death, disability)

4. Disability Tax Credit: gateway to the RDSP • Provides: • a reduction in payable income tax by the disabled individual or transferred to their caregiver; • medical expense deduction that is not covered by any means. • Eligibility is based on the functional impairment of the patient, NOT the medical diagnosis. • Approval can be fast and easy, or long and hard. • CRA will back-date and review tax returns for up to 10 years or the onset of the disability.

5. Activities of daily living • Speaking • Hearing • Walking • Elimination (bowel or bladder function) • Eating • Dressing • Mental functions for everyday life • adaptive functioning ie. personal safety, banking • memory  ie. simple instructions, personal information • problem-solving, goal-setting, and judgment together

6. Eligibility • Must have a severe and prolonged impairment in physical or mental function lasting at least one year even with therapy, devices and medication. PLUS ONE OF THE FOLLOWING • Markedly restricted in one activity of daily living. • Completely unable to perform 100% of the time. • Takes an inordinate amount of time (3x normal). • Cumulative effect in two+ activities of daily living. • Restrictions exist together. ex1. A person walks 100m but then must recuperate. ex2. Can only concentrate for a short period of time. • Significantly restricted (90% of the time) • Receiving life-sustaining therapy >14hrs/wk to support a vital function (ie. kidney dialysis).

7. Application Process • Part 1 – completed by the person with the disability or their caregiver • Part 2 – completed by the appropriate practitioner. • specialist -- family doctor • optometrist -- occupational therapist • audiologist -- physiotherapist • speech/ language -- psychologist pathologist * There may be a cost associated with this *

8. Tips for Applicants • Meet with the practitioner to: • explain the importance of the DTC/RDSP. • reinforce how the disability affects the activities of daily living. • If the practitioner does not seem receptive, go to another practitioner who is. • Provide suggested responses for the practitioner’s questions with the application. • Mail the application in yourself. • If your application is rejected: • DO NOT APPEAL • resubmit with additional information

9. The Registered Disability Savings Plan (RDSP) Registered investment plan Launched in 2008 by the Federal Government Federal matching grants and bonds One account per beneficiary

10. Why open an RDSP? • Financial security • Peace of mind for other family members • No impact on any other federal or provincial disability benefits (asset or income) • Grants and Bonds • Less personal contribution needed • Accelerated growth of savings • No restriction on how the money is used when withdrawn

11. Qualifying for the RDSP • Recipient of Disability Tax Credit • Less than 60 years of age • Canadian Resident • Valid Social Insurance Number

12. “Accountholder” versus “Beneficiary” • Accountholder: the individual(s) who establishes the plan and has principal decision-making abilities. • Must be over age 18 and contractually competent. • If not, someone legally authorized to act for the beneficiary must be the accountholder. • Can be held jointly between parents or between parent(s) and the beneficiary. • Beneficiary: the disabled individual who would be the recipient of the funds invested in the RDSP.

13. Putting Money In • Contributions can be made by anyone. • Contributions can be made until the beneficiary reaches age 59. • Tax-deferred rollovers of RRSP/RRIF/RPP/RESP. • Maximum lifetime contribution limit of $200,000.

14. Eligible Transfers • Transfer of RDSP from one financial institution to another. • location • quality of service • fund performance • Rollover of RRSP, RRIF or RPP from deceased parent or grandparent. • Save on estate tax • Taxable to the beneficiary when withdrawn

15. Rollover of RESP • RESP opened prior to becoming disabled. • Tax-deferred rollover to RDSP is allowed but not ideal. • Rollover will NOT attract grants. • any Canada Education Savings Grant or Canada Learning Bond will be repaid to the federal government. • Contributes to total RDSP contribution room. • Better option: • Withdraw funds • Repay all grants and bonds • Pay 20% penalty on any interest accrued • Re-contribute to RDSP and attract grants

16. Canada Disability Savings Grant (CDSG) • Contributions may qualify for matching • Eligible until December 31st at age 49 • Maximum lifetime CDSG is $70,000 Family Net Income* CDSG matching rates Max. annual CDSG $89, 401 or less 300% on first $500 $3,500 200% on next $1,000 Over $89, 401 100% on first $1,000 $1,000 *2015 rates (indexed annually to inflation). For a minor beneficiary, the family net income is that of his or her parents. Where the beneficiary is over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable.

17. Canada Disability Savings Bond (CDSB) • No personal contribution needed • Eligible until December 31st at age 49 • Maximum lifetime CDSB is $20,000 Family Net Income* Maximum annual CDSG $26,021 or less $1,000 Between $ 26,021 and $44,701 $1,000 reduced on a prorated basis Over $44,701 No CDSB is paid *2015 rates (indexed annually to inflation). For a minor beneficiary, the family net income is that of his or her parents. Where the beneficiary is over the age of majority, the family net income is that of the beneficiary and his or her spouse, if applicable.

18. Taking Money Out • Lifetime Disability Assistance Payment (LDAP) • an income stream that can begin at any age but no later than Dec. 31 of the year the beneficiary turns age 60. • minimum/maximum withdrawal amounts. • Once begun, must continue until the funds are depleted or death of the beneficiary. 2. Disability Assistance Payment (DAP) • lump sum withdrawal prior to starting the LDAP. • lump sum withdrawal in excess of the LDAP maximum. • can be requested at any time. • Withdrawals are made up of a portion of contributions (capital), interest, grants and bonds. • No restriction on use.

19. Proportional Repayment Rule • If money is withdrawn within the last 10 years from the last grant/bond deposit, the accountholder must repay the lesser of the following amounts: • $3 for every $1 that is withdrawn; OR • all grants and bonds that have been paid into the RDSP within a 10 year period

20. Example Jeff opens an RDSP in 2009 and contributes $1,500 annually in order to get the maximum amount of grants ($3,500) per year. In 2014, Jeff withdraws $600 from his RDSP. • Assistance holdback amount (old rules): • Jeff would repay the full $21,000 ($3,500 x 6) • Proportional repayment rule (effective Jan. 1, 2014): • Jeff would only be required to repay $1,800 ($600 x 3)

21. Termination of DTC eligibility • RDSP may remain open when beneficiary becomes DTC ineligible • Medical practitioner certification required • No contributions can be made • No new grant or bond entitlements • Withdrawals permitted • Can re-contribute if approved for the DTC in the future

22. Impact on Social Assistance Benefits • An income stream or withdrawal from an RDSP does not impact other asset or income-tested federal government programs, including: • Old Age Security (OAS) • Guaranteed Income Supplement (GIS) • Canada Pension Plan (CPP) • The Goods and Services Tax Benefit (GST Benefit) • Social assistance benefits • Ontario Disability Support Program (ODSP) • Asset Test: $5,000 single / $7,500 family • Income test: $6,000 annually

23. Death of the Beneficiary • RDSP will be closed • CDSGs and CDSBs received in last 10 years will have to be repaid • Net proceeds to estate of beneficiary • Under beneficiary’s will OR • If no will, through provincial rules • Tax on proceeds included in final tax return of the beneficiary

24. Segregated Funds • Sold exclusively by insurance companies • Investment product similar to mutual funds except: • Principle is guaranteed • Guaranteed death benefit • Creditor protection • Not subject to probate fees • Combines the growth potential of a mutual fund with the security of a life insurance policy • No restrictions on use when withdrawn • ensure to stay below the income/asset limits

25. $100, 000 Exempt from Asset Test • Personal contributions • Proceeds received as damages or compensation for pain and suffering due to injury • Expenses actually or reasonably incurred or to be incurred as a result of injury • Loss of care, guidance and companionship due to an injury • Inheritance • Life insurance proceeds

26. Henson Trust • aka Absolute Discretionary Trust. • A clause or provision contained within a will. • Assets held by a trustee for the benefit of a beneficiary. • As of Jan. 1, 2016, must be approved for the DTC to have a Henson Trust. • No maximum amount of assets. • Residual or secondary beneficiaries can be named if beneficiary passes away before all assets are used. • Funds can be paid to beneficiaries at anytime.