This article provides general information on different types of investment accounts, for ALS patients who may need to revise their original financial plan and objectives.
This article provides general guidelines only. For specific financial advice, consult a financial advisor.
A Registered Disability Savings Plan (RDSP) is a savings plan for those who are approved to receive the disability tax credit (DTC).
An RDSP may be an option for an individual living with ALS, provided they qualify for the Disability Tax Credit and meet the usual RDSP eligibility requirements (is a Canadian resident, is under age 60, has a SIN). It is possible to receive government-paid bonds or grants (via the Canada Disability Savings Bond / Grant) if an RDSP is opened while under age 49. However, those government payments must remain in the plan for at least 10 years before withdrawals can be made without triggering repayment. That requirement limits the usefulness of an RDSP for someone with ALS, as the typical life expectancy is shorter than that.
A Registered Retirement Savings Plan (RRSP) is a government-registered savings plan intended to help individuals save for retirement. Contributions to an RRSP are tax deductible, and investment earnings within the account are not taxed until funds are withdrawn.
A beneficiary should be designated when an RRSP account is set up. Certain beneficiaries, such as spouses or children are able to receive the RRSP in kind when the holder dies. However, other beneficiaries, such as siblings or cousins do not qualify for this. Instead, the RRSP is liquidated, taxed, and what remains is given to the beneficiary as cash.
The tax rate when the RRSP is liquidated is in accordance with the value of the RRSP; for example, if the RRSP has a balance of $1 million, it would be taxed as earning $1 million in a single tax year. It may be tempting to strategize withdrawals across multiple tax years to minimize this tax burden, however, leaving the money in the market accruing interest is often quite close to what would otherwise be saved by making early withdrawals.