Providing for Disabled Beneficiaries PART V

January 12, 2007 Hull & Hull LLP Beneficiary Designations, Executors and Trustees, Power of Attorney Tags: , , , , 0 Comments

If a testator does not adequately shelter the bequests or insurance policy beneficiary designations to a disabled beneficiary, the disabled beneficiary may still have a way of sheltering the gift to him or her by taking advantage of what is known as a “disability expense trust”.

A disabled beneficiary, or member of a benefit unit, is entitled to put monies derived from an inheritance or the proceeds of a life insurance policy into a trust. These funds, up to a maximum value of $100,000, will not be considered assets for ODSP purposes.

This trust is distinct from a Henson Trust in that the funds may be received directly by the recipient and subsequently placed into the trust. Such a vehicle is available to shelter the funds were the testator failed to do so.

Any income earned on the funds and accrued will not be considered income to the disabled beneficiary if it the fund does not exceed $100,000.

A recipient is given six months from the receipt of the funds in order to establish such a trust. The ODSP recipient has an obligation to advise the ODSP of the receipt of the inheritance or insurance policy proceeds, and should also advise of the intention to establish the trust within six months of the receipt of the funds. Failure to notify ODSP, or failure to establish the trust within the 6 month period will likely resulting an interruption of benefits.

Matters are complicated where the nature of the disability renders the ODSP recipient incapable of giving instructions to establish the trust. In such a case, the attorney for the incapable person under a valid Power of Attorney may give instructions, and establish the trust. If there is no attorney, a guardian of property will be required, and a formal application to the court for such an appointment will have to be made.

Have a great day.

Paul Trudelle

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