2011 Federal Budget—RDSPs—Shortened Life Expectancy

The federal Budget tabled on June 6, 2011 included no changes to the income tax measures originally announced in the Budget on March 22, 2011.

Under current rules governing registered disability savings plans (“RDSPs”), some provision is made to alleviate potential adverse consequences for beneficiaries that have shortened life expectancies. For example, for a “specified year” of an RDSP of a beneficiary, the withdrawal limits that apply in certain circumstances do not apply in that specified year. A “specified year” currently means the year in which a medical doctor certifies in writing that the beneficiary’s state of health is such that, in the professional opinion of the medical doctor, the beneficiary is not likely to survive more than five years, plus each of the five calendar years following that year. The budget proposes to extend the amount of potential “specified years” by including, if the plan is a “specified disability savings plan” (“SDSP”), the year of the medical certification plus each subsequent taxation year. The new proposals apply, upon Royal Assent, to the 2011 year. However, a transitional rule applies to beneficiaries who obtain the medical certification before 2012, in which case the 2011 $10,000 taxable withdrawal limit as described above can be utilized in 2012, effectively making it a $20,000 taxable withdrawal limit in 2012.

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