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RDSPs

July 2010

BMO RDSPsWhat people are saying

“I am very pleased that this long-term financial support is now available and I congratulate BMO Bank of Montreal for being the first major bank to offer RDSPs.”

Honourable Jim Flaherty, Minister of Finance. Government of Canada Press Release,

December 23, 2008.

“BMO is very pleased to be the first major Canadian financial institution to offer the RDSP. In our view, the RDSP is a terrific savings vehicle that enhances the financial security of people with disabilities.”

Ed Legzdins, Senior Vice President, Retail Investments, BMO Financial Group.

December 22, 2008.

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RDSPs

July 2010

BMO RDSPs – IntroductionIt started with BMO

A Registered Disability Savings Plan (RDSP) is a new registered investment plan for Canadians with disabilities

RDSPs encourage individuals and families to save for the long term financial security of persons with disabilities who are eligible for Disability Tax Credits

BMO Financial Group became the first bank to offer RDSPs on December 22, 2008

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RDSPs

July 2010

RDSP – Beneficiary eligibility

Must be a Canadian resident

Have a Social Insurance Number

Under age 60

Disability Tax Credit (DTC) eligible

– An individual may apply for the DTC by completing Form T2201, which can be found on the Canada Revenue Agency’s website http://www.cra-arc.gc.ca/E/pbg/tf/t2201/

Only one beneficiary can be named to an RDSP

A beneficiary can only have one RDSP

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RDSPs

July 2010

RDSP Account holder eligibility

A beneficiary who has the legal capacity to manage their finances

If a beneficiary does not have legal capacity to manage finances, the holder of a plan must be the guardian or other representative who is legally authorized to act on behalf of the beneficary

WHEN BENEFICIARY IS AN ADULT (18 OR OLDER)

WHEN BENEFICIARY IS A MINOR (UNDER AGE 18)

A legal parent(s) of the beneficiary A guardian or public department/agency

who is legally authorized to act on behalf of the beneficiary

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RDSPs

July 2010

RDSP – Contributions

Anyone may contribute to the plan with the written authorization of the plan holder

Contributions are not tax deductible

Contributions grow on a tax deferred basis while in the plan

The lifetime contribution limit is $200,000 per beneficiary

There is no annual contribution limit

Contributions are permitted until December 31st of the year in which the beneficiary of the plan turns 59

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RDSPs

July 2010

Contributions to an RDSP may qualify for the Canada Disability Savings Grant

RDSPsCanada Disability Savings Grant

Canada Disability Savings Grant (CDSG) Maximum annual CDSG – $3,500 (family net income less or equal to $81,941*)

Maximum annual CDSG – $1,000 (family net income greater than $81,941*)

Maximum lifetime CDSG available per beneficiary is $70,000

Family Net Income is based on: Where the beneficiary is a minor, the family’s net income

Where the beneficiary is an adult, the beneficiary’s net income (and spouse if applicable)

CDSG Eligible Until: The last day a beneficiary is eligible to receive the CDSG is December 31st the year in

which the beneficiary turns 49 years of age*Income amounts shown are for 2010 based on income tax returns filed for the 2008 tax year. Income thresholds indexed annually by CRA.

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RDSPs

July 2010

RDSPsCanada Disability Savings Grant

Annual Family Net Income

Matching CDSG on Annual RDSP Contributions

Maximum Annual CDSG

Less than or equal to $81,941*

On the first $500 in annual contributions

($3 for every $1 contributed)$1,500

On the next $1,000 in annual contributions

($2 for every $1 contributed)$2,000

Greater than $81,941* or no income info with CRA

On the first $1,000 in annual contributions ($1 for every $1 contributed)

$1,000

Remember, when the beneficiary turns 18 years of age, CDSG payments are based on their net annual income (and spouse if applicable)

*Income amounts shown are for 2010 based on income tax returns filed for the 2008 tax year. Income thresholds indexed annually by CRA.

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RDSPs

July 2010

RDSPsCanada Disability Savings Bond

Canada Disability Savings Bond (CDSB) Maximum annual CDSB – $1,000 (family net income less than or equal to $23,855*)

Smaller amounts of CDSB with net incomes between $23,856* - $40,969*

The maximum lifetime CDSB available is $20,000

Family Net Income is based on: Where the beneficiary is a minor, the family’s net income

Where the beneficiary is an adult, the beneficiary’s net income (and spouse if applicable)

CDSB Eligible Until: Last day a beneficiary is eligible to receive the CDSB is December 31st the year in which

the beneficiary turns 49 years of age

In addition to the Grant, the Canada Disability Savings Bond is available to beneficiaries whose net family income is lower than $39,065.

* Income amounts shown are for 2010 based on income tax returns filed for the 2008 tax year. Income thresholds indexed annually by CRA.

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RDSPs

July 2010

RDSPsCanada Disability Savings Bond

Annual Family Net IncomeCanada Disability Savings Bond

(Annually)

$23,855* or less $1,000

Between $23,856* and $40,969* Prorated amount of $1,000

More than $40,969* None

RDSP CONTRIBUTIONS ARE NOT REQUIRED TO OBTAIN THE BOND

Remember, when the beneficiary turns 18 years of age, CDSG payments are based on their net annual income (and spouse if applicable) * Income amounts shown are for 2010 based on income tax returns filed for the 2008 tax year. Income thresholds indexed annually by CRA.

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RDSPs

July 2010

Continuous Savings Plan in an RDSP over 20 years…

Your contribution of $125 a month = $1,500 a year ($30,000 total)

RDSP Bond of $1,000 a year to a maximum of $20,000 lifetime

RDSP Grant of $3,500 a year to a maximum of $70,000 lifetime

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

After 30 Years

Your Contribution

RDSP Bond

RDSP Grant

Total Plan

Results in $395,265 plan total (assuming a 6% rate of return over 30 years)

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RDSPs

July 2010

Lump sum contribution of $10,000 annually

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

After 30 Years

Your Contribution

RDSP Bond

RDSP Grant

Total Plan

Your contribution of $10,000 a year to a maximum of $200,000.

RDSP Bond of $1,000 a year to a maximum of $20,000 lifetime.

RDSP Grant of $3,500 a year to a maximum of $70,000 lifetime.

Results in $991,039 plan total (assuming a 6% rate of return over 30 years).

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RDSPs

July 2010

RDSP – Payments (withdrawals)from the RDSP

Made up of a portion of contributions, income and Grants and Bonds

Can be used for disability and non-disability related expenses

Only the beneficiary can receive payments from the RDSP

“10 YEAR AHA RULE” APPLIES TO ALL PAYMENTS FROM AN RDSP On all RDSP payments, all Grants and Bonds received in the 10 years

preceding the RDSP payment must be returned to the government

This amount is known as the “assistance holdback amount”

THERE ARE 2 TYPES OF PAYMENTS (WITHDRAWALS) FROM AN RDSP:

Lifetime Disability Assistance Payment – (LDAP)

Disability Assistance Payment – (DAP)

1.

2.

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RDSPs

July 2010

RDSP – LifetimeDisability Assistance Payment

LDAPs are recurring annual payments that, once start, continue until the death of the beneficiary.

LDAPs may begin at any age but must commence by the end of the year in which the beneficiary turns 60 years of age

Waiting until age 60 to begin payments from the RDSP will ensure all Grants and Bonds received up to age 49 would be protected againts the 10-Year AHA Rule.

The total amount of money that can be withdrawn from an RDSP each year is limited to a maximum annual amount, set by the government, to ensure the RDSP will provide an annual payments for the remainder of the beneficiary’s life.

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RDSPs

July 2010

RDSP – LifetimeDisability Assistance Payment

The maximum annual LDAP amount is limited by a legislative formula that considers the fair market value of the plan and the life expectancy of the beneficiary

Maximum LDAP =value

+ life expectancy age–3

Maximum LDAP example: $300,000 RDSP, beneficiary LE 80, age 60

+3

$13,043 annual maximum LDAP

=80 60–

$300,000

LDAPs are subject to the 10-Year AHA rule on any Grants and Bonds received in the past 10 years.

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RDSPs

July 2010

Maximum DAP example: $300,000 RDSP, beneficiary LE 80, age 27

RDSP –Disability Assistance Payment

DAPs are subject to the Assistance Holdback Amount rule

DAPS ARE A LUMP SUM PAYMENT MADE FROM THE RDSP TO THE BENEFICIARY OR TO THE BENEFICIARY’S ESTATE

Maximum DAP =value

+ life expectancy age–3

+3

$5,357 maximum DAP

=80 27–

$300,000

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RDSPs

July 2010

RDSP – Taxation

The RDSP payments (withdrawals) are made up of the following:

– Contributions

– Income growth

– Grants and Bonds

Contributions are NOT taxable

Income growth, Grants and Bonds are taxable in the hands of the beneficiary

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RDSPs

July 2010

RDSP and other Government Programs

Old Age Security (OAS)

Guaranteed Income Supplement (GIS)

Canada Pension Plan (CPP)

Goods and Services Tax Benefit (GST Benefit)

Most provincial disability support programs – please check with your province

AN INDIVIDUAL’S RDSP WILL NOT IMPACT ANY OF THE FOLLOWING PAYMENTS:

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RDSPs

July 2010

RDSP – Death of beneficiary

Grants and Bonds received in the 10 years preceding the beneficiary’s death must be returned to the government

The remaining holdings of the plan – Grants and Bonds older than 10 years, income growth and contributions – will pass to the beneficiary’s estate

The plan’s proceeds will be distributed according to the individual’s will

If the individual dies without a will, the funds will be distributed according to provincial estate laws

UPON THE DEATH OF A BENEFICIARY:

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RDSPs

July 2010

RDSP – Loss of eligibility

The RDSP must be collapsed

Grants and Bonds received in the 10 years preceding the beneficiary’s loss of DTC eligibility must be returned to the government

The remaining holdings of the plan – Grants and Bonds older than 10 years, income growth and contributions – become an asset of the beneficiary

Proceeds to beneficiary are taxable in the hands of the beneficiary (net of contributions)

UPON LOSS OF DTC ELIGIBILITY:

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RDSPs

July 2010

RDSP – Trained BMO RDSP representatives

BMO RDSPs are sold and serviced exclusively through our award winning investment call centre, BMO Investment Centre (BMOIC)

BMOIC Investment Specialists have completed a 3-hour government facilitated training program and can answer your RDSP questions

BMO RDSPs feature a full range of available investment solutions suitable for all long-term investors including BMO Guaranteed Investment Certificates (GICs), BMO Mutual Funds and managed solutions portfolios

BMOIC Investment Specialists are experienced in opening government plans such as RESPs, RRSPs, RRIFs and TFSAs and providing investment solutions for these plans

BMO IC is open Monday to Friday 7 AM to 11 PM (ET) and Saturday 9 AM – 5 PM (ET) BMOIC provides service in our two official languages plus Cantonese and Mandarin

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RDSPs

July 2010

RDSP – Opening a BMO RDSP

A BMOIC sales representative will take you through the RDSP account opening process by asking the required questions to open an RDSP and applying for the Canada Disability Savings Grant and Bond. Also your investment goals will be discussed in order to choose the right investment solution for you

All application forms will then be sent to you for signing. Once signed, the forms are returned to BMOIC for account opening and processing

Simply call the BMO Investment Centre (BMOIC)

at 1-800-665-7700

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RDSPs

July 2010

BMO.comAbout RDSPs, Grants, Bonds, Opening an RDSPhttp://www4.bmo.com/investments/0,4629,35649_62330610,00.html

HRSDCOverview of RDSPshttp://www.hrsdc.gc.ca/eng/learning/education_savings/promoter/infosession_odi_sept07.shtml

CRAOverview of RDSPshttp://www.cra-arc.gc.ca/tx/rgstrd/rdsp/menu-eng.html

Web resources

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RDSPs

July 2010

®™ Trade-marks of Bank of Montreal, used under license.

This communication is intended for informational purposes only and is not, and should not be construed as, investment advice to any individual. Particular investments and/or trading strategies should be evaluated relative to each individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

RDSPs

July 2010

Thank You!