I’m a big advocate of financial planning. Often transitions in our lives, such as marriage, divorce and death make us look at our future and the future of our loved ones with a renewed focus. 

When going through a divorce, often the negotiation is centered around the more commonly considered financial assets – the home, RRSPs and pensions. Financial planning for the children can be easily overlooked. 

Financial planning is even more critical if you have a child with disabilities.  

If you have a child with a disability   such as autism, the focus is probably centred on the immediate needs of education, health and intervention.  

Their future is a world of uncertainty and unknowns. 

Will they grow up to have a career, or even a job? Will they be able to master basic life skills, or need assistance?  

Your separation agreement should address the long-term financial contributions for all of your children but planning for your child with disabilities is crucial. 

How? Consider two things: 

  • Government Incentives and Grants 
  • Time 

Government Incentives:  The Registered Disability Savings Plan  

The Registered Disability Savings Plan (RDSP) is a long-term savings plan to help Canadians with disabilities and their families save for the future.  If you have a RDSP, you may also be eligible for grants and bonds to help long-term savings.   

Eligibility 

  • The beneficiary, must be a Canadian resident with a  Social Insurance Number (SIN);  
  • have a long-term disability,  
  • be eligible for the Disability Tax Credit and be
  • under the age of 60 (if you are 59, you must apply before the end of the calendar year in which you turned 59); 

Highlights 

  • Lifetime family contribution limit of $200,000. In addition, with written permission from the RDSP holder, anyone may contribute to the RDSP. 
  • The maximum government grant payable is $70,000.  The maximum bond payable $20,000    
  • Shared Custody:  The Canada Disability Savings Program (CDSP) system will use the income level that is the most advantageous for the beneficiary to determine the grant entitlements. 
  • After age 18, the beneficiary will most likely be the RDSP holder and their income will be used to determine grants 
  • Parents or grandparents of a financially dependent child or grandchild with a disability can arrange for some or all of their retirement savings to be transferred (tax-free) to their Registered Disability Savings Plan (RDSP) when they pass away 

Grant Information

If your family income is less than or equal to $95,259 (2019): 

  • For the first $500 contributed each year to the plan, the Government will deposit $3 for every $1 of your contribution, up to $1,500 a year. 
  • For the next $1,000, the Government will deposit $2 for every $1 you contribute, up to an additional $2,000 a year 
  • You may catch up for previous years. The maximum grant payable in any year is $10,500 

Bond Information: 

Depending on your income an annual contribution of $1500 could accumulate $4,500 in grants and bonds. That is a 300% return. 

  • If your net income is less than $31,000 the Federal Government will put $1000 into your RDSP account; 
  • If your net income is between $31,120-$47,630, the government will put a portion of $1,000 into your account 
  • Once your child is 18, then their income is used to determine the grant. 

Time: 

The second thing to consider is time.  

Consider the math: 

If you start contributing $1500 a year towards your child’s RDSP when they are 10, by the time they are 30, the plan will have received its maximum grant of $70,000 and maximum bond of $20,000. Your investment of $30,000 over 20-year period is worth $120,000. 

Now, consider the magic of compounding. Assuming no other contributions are made to the plan and the above contributions and grants are invested in a moderate portfolio earning 6%, by the time the beneficiary is 60 years old, the RDSP will be worth $ 1,267,666  

With a little knowledge and planning, the $30,000 invested over 20 years could be worth $1,267,666  

Having the assistance if a Financial Divorce Specialist as you navigate through the process can ensure that your goals and needs for your family aren’t overlooked. 

For more information, please contact Madhu at madhukanwar@elixirconsulting.ca or visit.  www.elixirconsulting.ca