19 Oct Planning For Loved Ones With Special Needs
We all want the best for our children. But when one of those children has a disability, the worrisome question arises; who will take care of my child when I am gone? It’s a common concern among all parents with children too young to care for themselves. But having a child with a disability, the parents’ concern becomes magnified, because that child may need care and assistance well into adulthood, and throughout their lifetime. By not properly preparing for the future, we may inadvertently disqualify our children from receiving much needed government benefits.
The Ontario Disability Support Program (ODSP) is an example of government benefits which provide a monthly income to help pay for basic living expenses such as food, clothing, rent or mortgage payments, utilities and personal items. It is means tested, which means that if a person does not have adequate financial resources to support themselves, they may be eligible for government assistance. The monthly benefit of those in receipt of ODSP is determined by family size, income, assets and housing costs.
Now what happens when a person who receives ODSP inherits assets from a loved one? Depending on the size of the inheritance, the disabled beneficiary could be disqualified from receiving ODSP. If the inheritance is substantial enough to provide for a lifetime of expenses and provide for a comfortable standard of living, then there may be no need to consider government assistance as a defining factor of the estate plan. But medical expenses, housing and other expenses add up, and in most cases, it makes sense to create an estate plan which protects the entitlement to government benefits.
By setting up a discretionary trust called a Henson Trust, the inheritance is excluded from the calculation of assets owned. There is no limit on the value of the Henson trust, unlike the $100,000 restriction of a disability expense trust, which may also be established to preserve entitlement. Even if the inheritance is valued at $100,000, the disability expense trust is burdened with greater legal fees than the establishment of a Henson Trust, and the inheritance (or life insurance proceeds) are payable directly to the disabled beneficiary, who then has to establish the trust within 6 months of receiving the proceeds. If the beneficiary is incapable of establishing the trust due to capacity issues, an application to the court will generally be required in order to appoint a guardian for property. It also places an obligation on the disabled beneficiary to advise ODSP of the establishment of such a trust, failing which the entitlement to such benefits may be denied.
Ensure that your loved ones are cared for. Call us to discuss your estate plan.