Tag: ontario disability support program

09 Jul

ODSP – How long do you have to put an inheritance into a trust before it counts against your asset limit?

Stuart Clark Estate Planning Tags: , , , , , , , , , , , 0 Comments

Yesterday I blogged about the potential for an individual who receives benefits from the Ontario Disability Support Program (“ODSP”) to place up to $100,000.00 from an inheritance they receive into a trust for their benefit without such funds counting against the maximum asset limit they are allowed to have to continue to qualify for ODSP. Although the use of such a trust can work as an effective tool to help insulate an ODSP recipient from the risk that an inheritance they receive could disqualify them from ODSP, as there is a deadline by which such a trust can be established it is important that ODSP recipient acts quickly to create the trust.

As noted in my blog yesterday, the ability for an ODSP recipient to establish a trust so that any inheritance would not count against their asset limit is governed by the Ontario Disability Support Program Act (the “Act“) as well as O.Reg. 222/98 (the “Regulation”). Although neither the Act nor the Regulation establish a deadline by which such a trust needs to be established, the Government of Ontario has released Policy Directive 4.7 which states that ODSP recipients may be given up to six months from receiving their inheritance to establish the trust. From the perspective of the Government of Ontario, if the ODSP recipient does not put the funds into the trust within six months of receiving the inheritance, the funds will begin to count against their maximum asset limit. As a result, if after the six month deadline the trust has not been created and the inherited funds push the ODSP recipient over the maximum asset limit they will lose their benefits.

Although the Government of Ontario appears firm in their position that an ODSP recipient has a maximum of six months to place any inheritance into a trust before the funds will count against their asset limit, it should be noted that as neither the Act nor the Regulation provide for any deadline by which the trust must be established that some people have argued that the six month deadline proposed by the Ministry should not be considered law and can be extended. Such an argument was raised before the Ontario Social Benefits Tribunal in 1711-09594 (Re), 2018 ONSBT 5888, wherein the Tribunal ultimately agreed to extend the deadline for a trust to be established to ten months after an ODSP recipient’s benefits had initially been terminated for going over the asset limit for not creating the trust within six months. In coming to such a decision the Tribunal states:

(8) Section 28(1) does not specify a time period within which an inheritance must be converted into a trust in order for it to qualify as an exempt asset.

(9) The Tribunal finds that in the absence of specific guidance in the legislation, it is to be inferred that an ODSP recipient should be given a “reasonable” amount of time to establish a trust and thereby exempt inheritance funds from his or her asset calculation. What is “reasonable” will in turn be determined by the circumstances present in each individual case. Such an interpretation allows effect to be given to section 28(1)19 and is in keeping with the purposes of the Act.” [emphasis added]

Although decisions such as 1711-09594 (Re) show that the six month deadline to establish the trust can be extended by the Tribunal to allow an ODSP recipient a “reasonable” amount of time to establish the trust before the inherited funds will count against the asset limit, as the Government of Ontario continues to reference the six month deadline in Policy Directive 4.7 for the trust to be established it is likely wise to continue to consider the deadline for the trust to be established to be six months.

Thank you for reading.

Stuart Clark

08 Jul

ODSP – Can you put inherited funds into a trust after receiving the funds and still qualify?

Stuart Clark Estate Planning Tags: , , , , , , , , , , , , , , 0 Comments

The use of planning tools such as a “Henson Trust” is an often discussed topic in the estate law world for what can be done to allow an individual who receives benefits from the Ontario Disability Support Property (“ODSP”) to receive an inheritance from an estate without losing their benefits. Although the Henson Trust can be an effective tool to allow an individual to receive an inheritance from an estate while not losing their benefits, as a central tenant of the Henson Trust is that the inherited funds do not “vest” in the beneficiary until the trustee makes a distribution in their favour (thereby allowing funds in the trust not to count against the asset limit provided for by ODSP before they are distributed), a beneficiary and/or Estate Trustee cannot create a Henson Trust after the testator has died as the inherited funds have typically already “vested” in the beneficiary and therefore would count against the asset limits for ODSP. As a result, if a beneficiary who receives an interest in an estate is also an ODSP recipient (and the Will did not use a tool such as a Henson Trust to ensure the inherited funds do not count against the ODSP qualification criteria), there is the risk that the beneficiary could lose their ODSP benefits as a result of the inherited funds putting them offside the ODSP qualification criteria.

Although advance planning is always preferable when dealing with a situation in which a potential beneficiary receives ODSP, sometimes for whatever reason a testator does not take steps prior to their death to ensure that their estate plan includes tools such as a Henson Trust that would allow the beneficiary to receive the inheritance as well as continue to receive their benefits from ODSP. Should this occur, although the options available after the testator’s death are more limited to the beneficiary, there remain certain remedial steps that could be taken by the beneficiary to help to insulate them against the risk that their newly inherited funds would disqualify them from ODSP.

The general parameters for who is entitled to ODSP and how it is to be administered is governed by the Ontario Disability Support Program Act (the “Act“), section 5(1) of which provides that the government through regulation is to establish a maximum “asset limit” for an individual who receives ODSP. The regulation that establishes the asset limit is O.Reg. 222/98 (the “Regulation”), section 27(1) of which sets $40,000.00 as the current maximum “asset limit” for an individual who receives ODSP (although such an asset limit is potentially higher if the individual has a spouse or dependants).

As a result of section 5(1) of the Act in collaboration with section 27(1) of the Regulation, if an ODSP recipient’s total assets exceed the $40,000.00 maximum asset limit after receiving their inheritance they would likely lose their ODSP benefits. To this respect, if the potential inheritance the beneficiary/ODSP recipient is to receive is significant, there is the very real risk that if no steps are taken to help to insulate the inheritance from counting against the asset limit the beneficiary would lose their ODSP benefits.

Although section 27(1) of the Regulation provides that the ODSP recipient’s assets may not exceed the maximum threshold, section 28(1) of the Regulation lists certain assets and/or interests which are deemed not to be included in the calculation of an ODSP recipient’s assets. These “non-counting” assets potentially include a trust that is established by a beneficiary with funds that they inherit from an estate. Specifically, item 19 of section 28(1) of the Regulation provides that the following would not count against the asset limit:

Subject to subsection (3), 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 from the proceeds of a life insurance policy.

Section 28(3) of the Regulation then further provides:

The total amount allowed under paragraphs 19 and 20 of subsection (1) shall not exceed $100,000.

As a result of section 28(1)19 of the Regulation in conjunction with section 28(3), if an ODSP recipient receives an inheritance or the proceeds of a life insurance policy they are allowed to put up to $100,000.00 of such funds into a trust to be held for their benefit without such funds counting against their asset limit for ODSP. As a result, if the inheritance that the ODSP recipient is to receive is $100,000.00 or less (or close to $100,000.00 such that any excess over $100,000.00 would not put them offside the asset limit), the potential option of putting the inheritance into a trust for the benefit of the ODSP recipient may be available to help insulate the inherited funds from counting against the asset limit.

If a beneficiary/ODSP recipient would like to explore the possibility of establishing such a trust after death they should speak with a lawyer to ensure that the trust is drafted in compliance with ODSP requirements.

Thank you for reading.

Stuart Clark

27 Sep

A Potential Halt to Significant Changes for ODSP Recipients

Natalia R. Angelini Estate & Trust, Estate Planning, In the News Tags: , , 0 Comments

Several newsworthy changes to the Ontario Disability Support Program Act, 1997 (the “Act”), came into force last year. For estates and trusts lawyers, the most important changes were increases in cash exemption limits, as well as increases in permissible payments to ODSP recipients.  Specifically:

  1. basic cash exemption limits were increased for a single person (from $5,000 to $40,000), and for a spouse included with the person (from $7,500  to $50,000); and
  2. permissible payments from a trust fund, segregated fund, gifts and other voluntary payments were increased from $6,000 to $10,000 over a twelve-month period.

This year, further to the Wynn’s Government’s 2018 Budget, a change was to have been made to subsection 43(1) of the general Regulation of the Act. Subsection 43(1) currently delineates several items that shall not be included in income, including the following at paragraph 13:

“Payments in addition to a payment under paragraphs 1 to 12 that are payments from a trust or life insurance policy or gifts or other voluntary payments up to a maximum of $10,000 for any 12-month period.” [emphasis added]

The contemplated amendment is a striking of the words: “up to a maximum of $10,000 for any 12-month period“.  The attached article reviews the intended change and its significance. The author cites that with these words being removed, other paragraphs relating to certain allowable gifts and voluntary payments would also be removed.  The impact would reportedly include that beneficiaries of a trust may receive unlimited monies, and that recipients of ODSP benefits could receive unlimited gifts and voluntary payments.  The $40,000 and $50,000 asset limits noted above would still apply, but RRSPs and TFSAs would no longer fall within the scope of such assets.

The modification to subsection 43(1) was to have already come into force, in part, but has not further to the Ford Government’s July 31, 2018 press release announcing that:

“Over the next 100 days, Ontario will work on a plan to reform social assistance…While work is underway, people receiving support through the Ontario Disability Support Program will receive a 1.5 per cent cost of living increase on September 1, 2018…While work is underway…Ontario will not proceed with initiatives announced in Chapter 1, Section 7 of the previous government’s 2018 Budget.”

It will be interesting to see what reform will be communicated to the public next month. We will keep you posted!

Thanks for reading and have a great day,

Natalia R. Angelini

26 Mar

Federal Budget Introduces Registered Disability Support Plan

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates Tags: , , , , 0 Comments

Like it or loathe it, the recent federal budget is an election budget, and strives to do something for everyone.

From an estate planning prospective, it reaches out to families with a disabled member, by establishing the Registered Disability Support Plan (“RDSP”).

The plan is available in 2008, and is similar in style to the current Registered Education Savings Plan. An individual who is eligible for the disability tax credit, their parent or legal representative may establish an RDSP.

The intent is that the RDSP would provide an income for the disabled individual once they attain the age of 60.

Under an RDSP, parents, beneficiaries or others will be able to contribute a lifetime maximum of $200,000. Contributions can be made until the beneficiary is 59. While contributions are not tax-deductible, investment income earned on investments within the plan will accrue tax free, and will be attributed to the beneficiary when paid out.

The Government will provide matching contributions, depending on family income. The matching grants are between 100 and 300%! The lifetime matching grant is $70,000.

Benefits paid out under the RDSP will not reduce any federal income-tested benefits. It is stated that the federal government will work with the provinces in order to ensure that the RDSP is “an effective saving vehicle to improve the financial security and well-being of children with severe disabilities.”

The effectiveness of the meshing between the federal plan and the provincial support programs, such as Ontario’s Ontario Disability Support Plan, is yet to be seen.

Thank you for reading,

Paul Trudelle

12 Jan

Providing for Disabled Beneficiaries PART V

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates, 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.

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11 Jan

Providing for Disabled Beneficiaries PART IV

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates, Beneficiary Designations, Executors and Trustees Tags: , , , 0 Comments

The Ontario Disability Support Program specifically provides that an absolute discretionary trust, also known as a “Henson Trust”, is not considered to be an asset of the disabled beneficiary. Thus, this gives a testator a significant planning vehicle to provide for a disabled beneficiary.

The discretionary trust must be truly discretionary, and the disabled beneficiary must have no vested right in the trust. Otherwise, the ODSP will consider the trust to be an asset of the disabled beneficiary.

To be a true discretionary trust, the trust must provide that any distributions to the disabled beneficiary are in the absolute discretion of the trustee. There must also be a gift over to a third party, so that the disabled beneficiary is not able to call for the collapse of the trust. Thirdly, the testator should provide for the distribution of any accrued income during the 21 year period, so that there is not a forced distribution of these funds.

Typically, the trustee will use the fund to purchase exempted assets for the disabled beneficiary, or to make distributions of income to the disabled beneficiary up to the $5,000 threshold, or to provide for the disabled individual once they turn 65 and are no longer entitled to benefits.

As the discretionary trust is not an asset of the disabled beneficiary, there is no limit to the amount that can be placed in the trust.

As the discretion given to the trustee is absolute, the choice of a trustee is of particular importance.

Have a great day.
Paul Trudelle

10 Jan

Providing for Disabled Beneficiaries – PART III

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates, Beneficiary Designations, Ethical Issues Tags: , , , , 0 Comments

Yesterday, I introduced the basic principals of the Ontario Disability Support Program (“ODSP”). In order to maintain benefits, the disabled individual must acquire assets that exceed the income and asset thresholds. In an estate planning context, this can be achieved, to a certain extent, by effective planning.

The ODSP exempts a number of assets from the calculation of the disabled person’s assets as defined under the relevant legislation and regulations. These exempted assets can be gifted to the disabled beneficiary, or bequested under a will, without disqualifying the individual. A partial list of assets that can be gifted or bequested includes:

• A principal residence, or the proceeds from the sale of a principal residence, provided that the proceeds are used for the purchase of another principal residence within 12 months from sale;

• An interest in a second property, if the Director is satisfied that the property is necessary for the health or well-being of a member of the benefit unit. For example, a second property that is a cottage could be considered necessary for health and well-being. Further, a second property in a country with currency restrictions that cannot be liquidated or where proceeds cannot be remitted outside of the country may also be exempted

• One motor vehicle, regardless of value, and a second vehicle if the net value is no more than $15,000 and it is required to permit a dependent of the applicant to maintain employment;

• The total cash surrender value held in an insurance policy, to a limit of $100,000;

• Prepaid funerals for an applicant or spouse;

• Registered Education Savings Plans;

• The amount remaining to be paid to a member of the benefit unit under a mortgage or agreement for sale (however, actual payments received qualify as income);

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08 Jan

Providing For Disabled Beneficiaries

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates, Beneficiary Designations, Ethical Issues Tags: , , , , , 0 Comments

UNABASHED PLUG: On January 17, 2007 I will be speaking as part of the Hull and Hull Breakfast Series Seminars. (For information, please see our website.). I am presenting a paper entitled “The Ontario Disability Support Program: What Every Estate Solicitor Needs to Know”.

As a lead up to that presentation (and to take advantage of the research done to prepare the paper), I thought I would spend some of my blog time this week discussing some of the issues to be considered were a disabled beneficiary is involved.

When one is planning an estate that involves a disabled beneficiary, special considerations must be taken into account. Obviously, the disabled beneficiary has special needs. The testator must discuss his or her hopes and goals in providing for the disabled beneficiary with the planner in order to ensure that these needs are, to the extent possible, facilitated. In addition, the estate planner must ensure that the benefits sought to be bestowed upon the disabled beneficiary are maximized.
The estate planner must ensure that these issues are fully canvassed. The estate planner must make efforts to ensure that a proper level of comfort is established with the client, as many clients are reluctant to discuss particulars of a disabled child. Further, the client may not be aware of the significance of the disability on his or her own estate plan.

Specifically, when considering an estate plan involving a disabled beneficiary, any bequests should be considered in light of the relevant social assistance legislation.

In Ontario, a program called the Ontario Disability Support Program exists. This program provides benefits to disabled Ontarians who meet certain financial and medical eligibility requirements. Once qualified, the ODSP recipient is entitled to income supplements of up to $979 per month. In addition, and often more importantly, the recipient is entitled to drug and dental benefits. Over the course of the disabled person’s lifetime, these benefits can be substantial.

 

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