Allow siblings to act as RDSP holders, report recommends

The Canada Revenue Agency’s (CRA) disability advisory committee (DAC) is calling on the federal government to allow siblings to act as RDSP planholders for persons with mental disabilities.

The recommendation is one of 10 the DAC made in its 2022 annual report, released Friday.

Currently, the list of people defined as “qualified family members” in the Income Tax Act includes parents, spouses and common-law partners of an adult person who is eligible to be a beneficiary of an RDSP, but whose “contractual competency” is in doubt.

Adding siblings to the list “would be a prudent succession-planning measure, as siblings of persons with mental disabilities are statistically expected to outlive their parents,” the report said. “Also, it could act as means of relieving an ailing parent of a person with a mental disability from having to continue to manage their RDSP.”

In addition, “the RDSP may be jeopardized when a planholder of the RDSP, such as a parent, passes away and there is no other qualifying family member. Should this happen, the person would need to have a guardian appointed or leave their RDSP unmanaged indefinitely.”

The report also called on the government to make permanent rules introduced temporarily in 2012 that allow qualified family members to open, manage and contribute to an RDSP on behalf of a person with a mental disability.

Absent the temporary rules, only a legal guardian or “some other legally authorized person” can become the planholder for an adult beneficiary with a mental disability. Those rules are set to expire in December 2023.

The committee also urged the federal government to allow a person with a mental disability to appoint a representative to manage their tax affairs without having to appoint a guardian, and to encourage the creation of a “national minimum-standard legislative framework” for supported decision-making laws, which are under provincial and territorial jurisdiction.

The committee also recommended the federal government allow an inter vivos trust (i.e., one created during a settlor’s lifetime) established for the benefit of a person who qualified for the disability tax credit (DTC) be eligible for the principal residence exemption on a qualifying property held by the trust.

Other recommendations in the report addressed the rules governing eligibility for the DTC, as well as those governing reviews and appeals when DTC applications are denied.

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.