Can parent open RDSP for mentally disabled adult child?

by Robert McKenzie

Has anyone considered what the requirement of "legally authorized to act on behalf of the Beneficiary" means or entails in the case of parents of a mentally disabled (since birth) child who has attained the age of majority at the time a DSP is being set up.


It seems clear from the definition of "Qualifying Person" that merely being a "legal parent" of such a Beneficiary (i.e., one who has attained the age of majority) is not sufficient to meet the "legally authorized to act on behalf of the Beneficiary" test.

The question seems to be: in a case where the Beneficiary (who has attained the age of majority) has been significantly mentally disabled from birth (and, hence, cannot grant a Power of Attorney to anyone to act on his/her behalf), what is required or will suffice to meet the account holder requirement of being "legally authorized to act on behalf of the Beneficiary"?

Must parents, in such circumstances, go to the expense (and encounter the delays) of retaining legal counsel and obtaining a formal guardianship order of some sort before they can set up a valid RDSP for their mentally disabled child?

(This seems like a very substantial burden and roadblock for many parents and one that has not been well-publicized, if indeed this is the case. Could such a burden and roadblock really have been intended? )

If a formal guardianship order is not required, then what, specifically, is a viable alternative to such an order?.

So far, I haven't found anyone meaningfully addressing this issue. I, for one, have delayed proceeding to set up a DSP for our mentally disabled adult daughter specifically because of grave concern over this technical issue.

As you may be aware, in a situation of the kind described, there is no valid DSP from inception unless the arrangement (Plan) is entered into with someone who is "a Qualifying Person in relation to the Beneficiary at the time the arrangement is entered into".

This clearly suggests that even if a legal parent were to obtain a guardianship order subsequent to setting up a DSP, that would not remedy the initial defect.

Comments for Can parent open RDSP for mentally disabled adult child?

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Oct 09, 2012
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New Rules re guardianship and RDSP
by: Graeme

The Federal Government's latest budget (when passed) will adjust the rules surrounding the establishment of an RDSP. Until 2016, the budget will allow other people, including parents, to set up the RDSP without formal guardianship. If anyone wishes to read the information on this, and other changes in the RDSP, please email me and I'll forward a copy of my Newsletter that outlines the changes.

Cheers...Graeme

graemetreeby@sympatico.ca

Oct 06, 2012
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Can get grant money up to age 49
by: Brian Poncelet, CFP

You can get grant money up to age 49.



Nov 28, 2011
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Can parent open RDSP for mentally disabled adult child?
by: Graeme Treeby

This is an issue that is being looked at in the RDSP review that is currently underway. I am apposed to guardianship for this purpose since I don't agree with stripping my daughter of all her rights just to set up an RDSP. My solution was to set up the RDSP at BMO where they are taking a different approach to the ability to act on behalf of our children.

The comment below about trusteeship and ODSP is somewhat inaccurate. The ODSP document only allows you to control the ODSP resources. It does not give you control over the finances of your adult child.

Further, I think that the second section of the comments below about a group home liquidating a person's assets is also incorrect. I have never heard of a group home having access to a person's savings, trust accounts or RDSP's. I would love to hear more from the poster.

Cheers...Graeme

Nov 27, 2011
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Can parent open RDSP for mentally disabled adult child?
by: Anonymous

In Ontario, if your child receives the Ontario Disability Support Program monthly pension, the Ontario government gets you to sign a "Trustee" form. This enables you to control the finances for your disabled child. I have opened a bank account for my child using this form. You should be able to open an RDSP as well, and control these funds. Keep in mind that as a trustee, these finances could be subject to audit, so book keeping is required to show that the funds are being used for your child, not for the parent.

There is a caution with regards to your disabled child accumulating savings. If you feel your child will go into a group home in the future, that money that has been saved in a bank account, trust fund or in a RDSP may be liquidated by the group home with your child not receiving any more benefit if he/she had the money or not. It may be like throwing all that money away. You may want to check with the local association for the developmentally delayed to see how they would administer these funds if your child was in a group home that they run.

Dec 03, 2009
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More information on RDSP
by: Brian Poncelet, CFP

One of the people I have asked on this topic is
Senior Registered Plans Analyst at CRA about this topic Feel free to go to the income tax act (link)
http://laws.justice.gc.ca/eng/I-3.3/page-1.html#anchorbo-ga:l_I-gb:l_G

In a nutshell there is no problem. Another department to talk to is www.hrsdc.gc.ca same comments there as well.

Graeme is correct about BMO. One idea is to set up a conference call to discuss this (topic) with them which they offered, let me know if any one is interested.

Regards,

Brian Poncelet, CFP
www.rightinsurance.ca

Dec 01, 2009
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Not the Legal Guardian
by: Graeme Treeby

The issue of legal guardianship is causing quite a stir in the Special Needs legal community. You are NOT a legal guardian of your son or daughter in Ontario by simply by claiming the DTC. Technically your are not able to set up an RDSP for your adult child if they are not capable themselves. I was recently quoted in an article in the Toronto Star ( http://www.thestar.com/business/investing/article/723902--special-program-for-special-needs ) regarding this issue. Although somewhat misquoted, the basics are there. The legal community is also working on something that may look like being an ODSP Trustee for RDSP.

Having said all that, it appears that BMO is of the opinion that a parent should be considered as Legal Representative for the RDSP. Many families have been allowed to set up an RDSP for their adult child with an intellectual disability with BMO while other banks have turned them away. The Federal Government has gone along with this.

Cheers...Graeme
Special Needs Planning Group
www.specialneedsplanning.ca

Nov 25, 2009
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More information on RDSP
by: Brian Poncelet, CFP

There is some more information on CRA's web site, see rc4460. I spent a few hours on the phone and got a Senior Registered Plans Analyst at CRA to -email a link to more information.

The key facts to know the HRDC (after talking to them) checks sin numbers etc. with CRA to see if you qualify for the grants and bonds, they do not see any paperwork just work off sin numbers! The plans become registered with CRA.



regards,

Brian

Nov 24, 2009
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Do You Claim the Disability Tax Credit?
by: Brian Poncelet, CFP

Hi Robert,

Who does your daughter's taxes? If you claim the Disability Tax Credit then you are the guardian.

"For beneficiaries over the age of majority, the holder is generally the beneficiary. In certain circumstances, a guardian, legal representative or public department may be eligible to become the holder". From...

Human Resources and Skills Development Canada

www.hrsdc.gc.ca

I am currently setting up RDSP plans now (under 18) but I don't see a problem in your case since you are the parent (assuming you file taxes on behalf on your daughter)

Have you reviewed the four page HRSDC form?

Feel feel to drop me a line.

regards,

Brian

905 338-7689
www.rightinsurance.ca

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