Every part of the capital used contrary to the provisions is considered a liquid asset on the last day of the month in which it is used contrary to those provisions. The part of the capital that is the subject of unsanctioned use is added to the client’s regular liquid assets on the last day of this month AND THE BASIC EXCLUSIONS APPLY. This includes:
- the amount of an indemnity paid as compensation for immovable property following an expropriation or a disaster;
- the amount of an indemnity paid as compensation for movable property following a disaster;
- the amount from the sale of a residence;
- the amount of loans and scholarships (public or private plan RESP type) that a dependent child receives as a student;
- the amount of a loan taken out to consolidate the debts of a beneficiary;
- a sum received in the form of an amount or a pension credit from a pension plan or a retirement savings instrument, where it is not used within 30 days as a contribution to another retirement plan or retirement savings instrument.
- the amount of a grant or loan to be used to build or repair a residence;
- the amount of a grant or loan to be used to start a business or to create one's own employment.
REDEEMING AN RRSP
The sums redeemed from a registered retirement savings plan (RRSP) are considered liquid assets. Liquid assets include the sums that a financial institution holds on deposit, so long as the client has ready access to the sums. In consequence, the amount considered when redeemed from an RRSP is the net amount.
For example, on June 15, a client borrows $6,000 to do repairs on his house. This capital is excluded for 6 months, until December 15. If the client uses this sum on August 15 to purchase furniture, then he has made unsanctioned use of sums for that month. The client is considered to possess $6,000 on August 31. His benefits for the month of September is decreased or cancelled to account for these exclusions.
If, however, the client did not spent the entire $6,000 to buy furniture, then only the amount spent on furniture is be taken into account—for instance, $2,000. This sum of $2,000 will then be added to the total liquid assets owned by the client on August 31, and the basic exclusion will be subtracted. The remaining $4,000 will continue to be excluded until December 15.
In yet another example, consider a client who owns an RRSP worth $20,000. The client redeems $1,000 from his RRSP on June 15. On June 30, this $1,000 is added to his other liquid assets, now totalling $2,000, which is in excess of the basic $1,500 exclusion. Because he has 30 days to place the redeemed amount in another retirement savings instrument, there is no surplus liquid assets on June 30. On July 10, he spends $1,000 on furniture, thereby using the sum for unsanctioned ends. The $1,000 will be added to liquid assets owned by the client on July 31, and the basic exclusion is applied. If applicable, the benefits for the month of August will be decreased.
Person eligible for the 66/72 benefit
Liquid assets that constitute property
- Every part of the capital from a payment or pension credit from a retirement plan or retirement savings instrument that is not used within 30 days for the same purposes;
- The capital from a grant or loan to be used to:
- Build or repair a residence when this amount is not used within six months of receipt or is used for purposes other than those for which it was received;
- Start a business and create employment for oneself when this amount is not used within six months of receipt or is used for purposes other than those for which it was received.
Amounts accumulated by the person eligible for the 66/72 benefit under an individual savings plan of an individual development account or an institutional savings plan used for purposes other than those intended.
Since the spouse’s property is not considered, the concept of unsanctioned use cannot be applied to liquid assets constituting property that belong to the non-client spouse during the prescribed period.