Giving to People Receiving ODSP
The Ontario Disability Support Program, or ODSP, provides income support to Ontarians with disabilities and assistance with finding work or starting a business. Financial eligibility for ODSP depends both on the applicant’s level of income, and a consideration of his or her assets. The purpose of these restrictions on income and on assets is to ensure that support is given to those who truly need it. An unfortunate consequence, however, is that a gift or bequest given to a person receiving ODSP may unintentionally cause him or her to breach the income or asset restrictions and become ineligible for support. If not handled carefully, a gift to a person on ODSP can do more harm than good. Fortunately, there are a few ways to give to a person on ODSP without disturbing his or her entitlements under the program.
The rules regarding eligibility for the program and what sorts of assets will result in ineligibility are under the regulations to the Ontario Disability Support Program Act, 1997. If a person goes over a certain prescribed limit for assets, he or she could lose their eligibility. There is also a separate limit on income. If planning a gift to someone on ODSP, the donor will need to be mindful about both the income limit and the asset limit.
One way to support someone on ODSP is through a trust. There are certain types of assets that a person receiving ODSP can own that do not count towards the asset limit (e.g. the value of that person’s principal residence, tools of the trade necessary for employment, a motor vehicle, etc.). One of the exemptions is for “the person’s beneficial interest in assets held in one or more trusts and available to be used for maintenance if the capital of the trusts is derived from an inheritance or the proceeds of a life insurance policy”. There is a limit on that of $100,000, cumulatively. This means that it is possible to leave someone up to $100,000 under a will or life insurance policy, so long as that money is in trust or is put into a trust within a short period of time after receiving it. As money flows out of the trust to the beneficiary, the trustee and the beneficiary will still have to be careful not to violate the income limit, even if the trust doesn’t count towards the asset limit.
Another option is a Henson trust. This kind of trust is named after the case of Ontario (Director of Income Maintenance, Minister of Community & Social Services) v. Henson, 1987 CarswellOnt 654 (Ont. Div. Ct.). There is no upper limit to the amount of money that can be put into a Henson trust. What prevents this kind of trust from infringing the asset limit is that the beneficiary does not actually have any entitlement to the money in the trust; the trust is “fully discretionary”. The trust documents give the trustee complete discretion to choose to give the money to the ODSP recipient, or not (although we hope that the trustee will choose to give the money to the ODSP recipient, of course). Because the beneficiary has no control over whether he or she will receive anything and no right to demand payment from the trust, the money in the Henson trust can’t really be said to belong to him or her. The corollary to this is that Henson trusts can be open to abuse. The trustee could use his or her discretion to deny any benefit to the ODSP recipient. Because of that, it is very important to choose the trustee carefully and to pick someone who can be trusted to do the right thing. Again, as money flows out of the Henson trust to supplement the income of the ODSP recipient, care must be taken not to offend the income limit.
When planning to make a gift to a person on ODSP in a will, through a trust, or otherwise, a lawyer should be consulted to ensure that it is done properly. With a little bit of careful planning, it is possible to put aside some money to help a person who is receiving support from ODSP without disturbing his or her benefits under the program.