RDSPs July 2010 BMO Registered Disability Savings Plans

RDSPs July BMO RDSPs What 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, “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.

RDSPs July BMO RDSPs – Introduction It 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

RDSPs July 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 Only one beneficiary can be named to an RDSP A beneficiary can only have one RDSP

RDSPs July 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

RDSPs July 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 31 st of the year in which the beneficiary of the plan turns 59

RDSPs July Contributions to an RDSP may qualify for the Canada Disability Savings Grant RDSPs Canada 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 31 st 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.

RDSPs July RDSPs Canada 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.

RDSPs July RDSPs Canada 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 31 st 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.

RDSPs July RDSPs Canada Disability Savings Bond Annual Family Net Income Canada 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.

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

RDSPs July Lump sum contribution of $10,000 annually 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).

RDSPs July 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.

RDSPs July RDSP – Lifetime Disability 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.

RDSPs July RDSP – Lifetime Disability 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 expectancyage – 3 Maximum LDAP example: $300,000 RDSP, beneficiary LE 80, age $13,043 annual maximum LDAP = 8060 – $300,000 LDAPs are subject to the 10-Year AHA rule on any Grants and Bonds received in the past 10 years.

RDSPs July 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 expectancyage – $5,357 maximum DAP = 8027 – $300,000

RDSPs July 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

RDSPs July 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:

RDSPs July 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:

RDSPs July 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:

RDSPs July 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

RDSPs July 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

RDSPs July BMO.com About RDSPs, Grants, Bonds, Opening an RDSP 0,00.html HRSDC Overview of RDSPs moter/infosession_odi_sept07.shtml CRA Overview of RDSPs Web resources

RDSPs July ®™ 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!