RDSPs (the registered disability savings plan) allows parents to save for their children who have a disability and qualify for the disability tax credit. Many Muslim parents have children that require this extra assistance and financial support but want to know is RDSPs Halal? The short answer is YES. However, we need to examine how RDSPs work, how you can benefit, and how they ought to be invested to stay Halal.
How does and RDSP work?
Children who qualify for a disability tax credit also qualify to open and Registered Disability Savings Plan (RDSP). The maximum lifetime contribution limit for an RDSP is $200,000. There are no yearly limits for how much you can contribute to an RDSP however limits do exist for the Canada disability savings grant and the Canada disability Savings bond.
Canada Disability Savings Grant
The Canadian government can add 100%, 200%, or 300% in disability grant money to your contribution. From the day your child is born until they turn 18. The beneficiary (your child) can get grant money up to $3500 per year and $70,000 over the lifetime of the RDSP. The grant amount is calculated based on contribution levels and household income. If your family income is under $97,000 you get a 300% grant on the first $500 contributed, 200% on the next $1000 contributed. $1500 in contributions gets you $3500 in grants or a total account value of $5000 for one year.
If you earn more than $97,000 per year you get 100% of every dollar contributed up to $1000 per year.
Canada Disability Savings Bond
If you are in a low-income family you may qualify for the Canada Disability savings bond. If you earn less than $31,711 per year the government will give you a disability savings bond of $1000 per year without you having to make any contributions. If you earn between $31,000-$48,000 you will get an amount proportional to the $1000 bond based on your total income. If you earn above $48,000 you will not qualify for the bond.
How can you benefit?
Obviously opening an RDSP for a disabled child can help you save and invest for their future. Further, this can be a way to create income for them down the road with investments and payments out of the disability savings plan. Many families use this as a way to help ensure their children with disabilities are cared for in the long-term.
How to make it halal?
Like any other account in Canada it is neither halal nor haram it all depends on how the money inside the RDSP is used that determines its permissibility. Most carriers of the RDSP are banks and although you may be able to find some halal investment options I believe having an advisor that can actually guide you through it is paramount. That is why if you open an RDSP through us we can make sure it is set up at one of the providers and the investments are looked after in a halal way.