A. Every RDSP Needs a “Plan Holder”
The Income Tax Act says who can open and make decisions about money in an RDSP.
To open an RDSP, a person called a “plan holder” signs a contract with a financial institution.
After opening an RDSP, plan holders make important decisions about managing money inside the RDSP. For instance, they may be able to apply for government grants and bonds, make investments and ask for some money to be paid to the beneficiary.
B. Adults Must Have Capacity to Be the Plan Holder
When beneficiaries are adults, they can be the plan holder. However, adults cannot be the plan holder when there are concerns about their capacity under the law to enter into a contract with a financial institution.
Capacity to be a plan holder means being able to understand facts about the RDSP and the consequences of making (or not making) decisions about the RDSP.
The RDSP is a complex savings plan and there are adults who are unable to understand and make decisions about the RDSP. In these cases, someone else must be the plan holder.
Banks, credit unions or other financial institutions can refuse to open an RDSP for an adult whom they believe does not have capacity under the law to enter into a contract.
Adults may also want to name another person to be the plan holder if they believe that they do not have capacity to open an RDSP and make decisions about money in an RDSP.
*More information on plan holders is in found in the Final Report, Chapter II.D, “Opening and Managing an RDSP”.
C. Naming Another Person to Be the Plan Holder
The Income Tax Act does not have a process to name another person to be a plan holder for adults who cannot be their own plan holder. Plan holders must be named under laws in Canadian provinces and territories that relate to issues of capacity.
In Ontario, an RDSP plan holder could be an attorney or a guardian for property. The Substitute Decisions Act, 1992 explains how to get an attorney or a guardian.
Adults can name an attorney to make decisions for them when they do not have capacity to make their own decisions in a power of attorney document.
Adults who do not have an attorney to make decisions about the RDSP and who cannot make a power of attorney for property can apply for a guardian. Family members and other interested persons can also apply to have a guardian named for an adult.
The LCO heard that some adults find it difficult to get an attorney or a guardian to be their RDSP plan holder in Ontario. In the next sections, we explain what we learned about these difficulties and the goals for a simpler process.
In Ontario, a plan holder for the RDSP could be an attorney or a guardian.
Some adults find it difficult to name an attorney or guardian to be their plan holder under the rules in place in Ontario.
The LCO’s project is about a simpler process to name an RDSP legal representative who can be the plan holder for adults who do not have an attorney or guardian.
D. Difficulties Naming a Plan Holder for Adults in Ontario
1. Naming a Plan Holder in a Power of Attorney
Powers of attorney can be made quickly and in private. Adults can choose the person who will make decisions for them in the power of attorney document. They can also put their wishes in the document and the attorney must respect those wishes.
However, some adults with disability have not been able to make a power of attorney for the RDSP because it is too difficult for them.
There is a test to show that an adult has capacity under the law to make a power of attorney. The test is different from the test for capacity to be a plan holder because choosing an attorney involves different decisions. (We explain the test for capacity to be a plan holder on page 6.)
The full test for capacity to make a power of attorney under the Substitute Decisions Act, 1992 is found in Appendix A of this summary. It has been described as requiring that you must
- know what property you have and its approximate value;
- be aware of your obligations to the people who depend on you financially;
- know what you are giving your attorney the authority to do;
- know that your attorney is required to account for the decisions they make about your property;
- know that, as long as you are mentally capable, you can revoke (cancel) [the] power of attorney;
- understand that if your attorney does not manage your property well its value may decrease; and
- understand that there is always a chance that your attorney could misuse their authority.
The test for capacity to make a power of attorney was made to cover all of an adult’s property, not only the RDSP. We learned that some adults with disability in Ontario may experience challenges making a power of attorney for the RDSP because they may be unable to meet this test for capacity.
2. Applying for Guardianship
Adults who cannot make a power of attorney may wish to get a guardian to be their plan holder. However, the LCO heard that the process of applying for guardianship can be difficult when it is only used for naming a plan holder for an RDSP.
There are two places to apply for guardianship in Ontario:
- The Superior Court of Justice (by asking for a court order) or
- The Office of the Public Guardian and Trustee (after asking for a Certificate of Incapacity from a professional “capacity assessor”).
In both cases, adults must be assessed and found to be incapable of managing property. The Substitute Decisions Act, 1992 defines what incapable of managing property means. The full test is found in Appendix A of this summary. It has been described this way:
The [Substitute Decisions Act, 1992] sets out a two-part definition of mental capacity in that the person must have the ability to understand information relevant for making decisions, and in addition, show the ability to appreciate the consequences of a decision or lack of a decision.
This test requires adults to be able to understand facts about their property and different ways of managing it, and to be able to appreciate the possible consequences of making (or not making) decisions about their property.
Some people told the LCO that they do not want to apply for guardianship if the only issue is opening an RDSP because they do not want adults to have to be found incapable of managing property. The main concerns that we heard, however, were about the costs and time involved in applying for guardianship when the purpose is only to name a plan holder for the RDSP.
Like powers of attorney (see above), the process to get a guardian in Ontario was made to cover many types of property and situations. There are multiple steps in the process, which can take time and cost money. As a result, applying for guardianship can be difficult for adults and their family and friends who want to open an RDSP right away to begin saving for the future.
*We review difficulties with getting an attorney or a guardian to be a plan holder in the Final Report, Chapter III.A, “Rationale for a Streamlined Process in Ontario”.
*This project is specifically and only about a simpler process to name an RDSP legal representative in Ontario. The LCO’s larger project on Legal Capacity, Decision-Making and Guardianship reviews ways to simplify guardianship applications more generally.
E. Goals for Change
When we did our consultations, we asked people what the goals for change should be. Many people said that they want a way to name a trusted person as a plan holder that is easy to use, affordable and private.
We also looked at the goals of laws and programs that affect persons with disability in Ontario. For instance, we looked at the Canadian Charter of Rights and Freedoms and the Convention on the Rights of Persons with Disabilities.
Based on our research and consultations, we created a list of goals for change. These goals helped us with our recommendations.
The LCO believes that a simpler process to name an RDSP legal representative should achieve these goals:
- Meets beneficiaries’ needs for RDSP decision-making.
- Makes sure that beneficiaries can participate in decisions about their RDSP, even after an RDSP legal representative has been named.
- Protects beneficiaries from RDSP legal representatives misusing their authority.
- Is practical, easy to use and affordable.
- Makes other individuals and organizations (such as financial institutions) feel secure about risks that may affect them.
*Descriptions of the goals for change (we call them “benchmarks for reform”) are found in the Final Report, Chapter I.E.2, “Benchmarks for Reform”.
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