Henson Trust
Henson Trust
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In this booklet
Introduction: Caring for your relative with a disability 3
Part 1:
How Henson Trusts can support people who receive
ODSP benefits 4
What is a trust? 4
When is it a good idea to provide fully for
your loved one using a trust? 5
What kind of trust could help your relative? 5
Part 2:
Everything you need to know about ODSP 7
What is ODSP? 7
Who can get ODSP? 8
How does ODSP define disability? 8
How does ODSP decide how much money a
person with disabilities will get? 8
Answers to common questions about ODSP 10
Part 3:
Setting up a Henson Trust 13
What to consider when you choose a trustee 13
What to include in the Henson Trust provisions 14
Answers to common questions about Henson Trusts 15
Part 4:
How to prepare for the future 20
Developing a financial plan 20
Building up your estate 22
Other things you can do to meet your relative’s needs 23
Answers to common questions about wills and estates 26
Part 5:
Is a Henson Trust a good choice for you? 29
Profiles of families considering a Henson Trust 31
Part 6:
Resources 32
Part 7:
Glossary 33
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settlor can also be the beneficiary of a trust. A On the other hand, if your relative with a disability
trust may be set up while the settlor is living could enjoy a lifestyle which they could not have
(an ‘inter vivos’ trust) or in the settlor’s will (a if they were dependent on ODSP benefits and you
‘testamentary’ trust). or other family members have enough money,
you could leave most of your estate in trust for
the relative with a disability.
The person or persons who manage the money
and assets are called the trustees. The bank
account or assets are in the trustees’ names, but What kind of trust could help
the trustees must use them for the beneficiary. If your relative?
you use a trust for your relative with a disability,
Two kinds of trusts can help your relative with
you must make sure that the trustees are reliable a disability:
and honest. • Henson Trusts and
• Inheritance or Shelter Trusts.
When is it a good idea to provide Here is general information about these two
types of trusts. More detail about Henson Trusts
fully for your loved one using a trust? is in Part 3 of this booklet (starting on page 13).
Ask yourself four questions when you consider
whether to set up a trust to provide fully for your
Henson Trust
relative with a disability:
Henson Trusts have been allowed ever since
• Would my relative enjoy a better quality of the mid 1980s, when Ontario’s Court of Appeal
life if the family fully supported her rather decided that a person with a disability receiving
than if she received ODSP? Family Benefits should not be cut off from
benefits if they were getting money from a trust
• Do I, or other relatives, have enough assets set up to help them, so long as the trust gave
to fully support my relative? a complete control (or ‘absolute discretion’)
to the trustees about when to make payments
• Are my other beneficiaries self-sufficient? from the trust. The Court said that the assets
If not, do I and other relatives have enough in a trust set up to support that person should
assets to support the other beneficiaries as not be considered as that person’s assets, since
well as my relative with a disability? someone else made decisions about how to
spend the money in the trust. The court decided
• Is it possible that my relative with a that the person should qualify for Family Benefits
disability will not qualify for ODSP in the as long the support they got from the trust was
future, or not need ODSP in the future? permitted under the Family Benefits rules.
For example, is it possible that he will be
employed and earn enough to provide for The same rules apply to people receiving ODSP
his own needs? benefits. In July of 2005 the Social Benefits
Tribunal confirmed that a person receiving ODSP
If you think that your relative’s quality of life could be supported by money in a Henson Trust.
would not be significantly better if the family In that case, the trust had assets of more than
provided for them fully, then you should consider $100,000. The Tribunal found that the person
leaving the bulk of your estate to your other receiving ODSP, Ms. Fisher, could not force
beneficiaries and setting up a modest trust for the trustees to give her money from the trust.
the person with a disability. If you are considering Because of this, the Tribunal decided that the
this option, keep in mind that the trustees must money in the trust was not an ‘asset’ and that
understand and comply with the ODSP rules. Ms. Fisher was still eligible for ODSP benefits.
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You can set up a Henson Trust while you are still from an estate or from insurance benefits, but it
alive with an inter vivos trust agreement, or you is usually simpler and more effective for you to
can put a Henson Trust in your will, to be set up set up the trust in your will for them.
after you die.
Your relative will still qualify for ODSP benefits
The current law says ODSP cannot count the as long as there is less than $100,000 in
money in a Henson Trust when they do the asset the Inheritance or Shelter Trust. (If there is
test to decide if your relative is eligible for ODSP. more than one Inheritance or Shelter Trust
The only money that will affect your relative’s established for them, the total placed in all
eligibility is money that they own and control, or such trusts must total less than $100,000 under
money spent to benefit them. current ODSP rules.) Each year, your relative
can be paid all of the income from the Trust, or
When you set up a Henson Trust, the trustee some can be reserved by the trustees to meet
can spend up to $5,000 on your relative during extra expenses.
any consecutive 12-month period without
affecting their ODSP benefits. The $ 5,000 While the ODSP rules do not say that a
limit is for money given to your relative and recipient with a disability must sign a formal
money spent for their benefit. The trustees can trust agreement, in general it is a good idea
spend money on ‘comforts’ such as a radio or for them to do so, where the trust has not been
television, clothing, extra food, recreation or established in their parent’s will. The ODSP
entertainment. The trustees could pay part of rules do say that money in the trust must be
their rent so they could afford a nicer apartment kept separate from an account controlled solely
than the ODSP shelter subsidy would cover. by the person with a disability. To make sure
The trustees could also give your relative that the money in the trust is kept separate, you
spending money. Your relative does not have to should get legal help to prepare a simple trust
tell ODSP how they spent this money, but they agreement. It should say who the trustees are
must report that they received it. and how money in the trust will be handled. For
example, the trust agreement should say what
The trustees could also spend additional the trustee should do with any income earned
amounts for disability-related items and by the trust -- whether the income the trust
services, in accordance with MCSS policies. earns must be given to the person, or whether
it can be added to the capital in the trust to
If the trust provides for it, the trustee can spend meet extra expenses in the future.
both the capital and the income in a Henson
Trust.
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Finally, ODSP tests for financial need. People Report Form, which is optional to submit – it
receiving ODSP are allowed to have some assets can be helpful to the applicant, but only if it is
and income. What they are allowed to have completed carefully.
depends on the kinds and sources of assets
and income that they have. You need to know How does ODSP decide how
these rules about asset and income exemptions
in order to develop a financial plan for your much money a person with
relative. disabilities will get?
ODSP uses three steps to test financial need.
How does ODSP define disability? This process is called the Budget Deficit Needs
Here is how the ODSP Act defines ‘disability’: Test.
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Certain funds are also exempt, including: s where the person lives (Are they a
• a trust fund created or derived from boarder? Do they rent? Do they own
an inheritance and the cash surrender where they live?) and their shelter costs
value of a life insurance policy, up to (the costs of board, rent, or home
a cumulative total of $100,000 for all ownership) up to a maximum set by a
trust funds and life insurance policies formula
• a trust fund of any amount if it s the cost of any special things they
qualifies as a Henson Trust (absolute need (such as a special diet) that are
discretionary trust), where the trustee allowed under the ODSP rules.
makes all of the decisions about
spending the money The total of these amounts is the person’s
• funds used to purchase approved budgetary entitlement.
disability-related items and services
(no financial limit) Step 3: Income test
• interest earned on cashable assets
Then ODSP subtracts the person’s monthly
• a compensation award of up to
income from the person’s budgetary entitlement.
$100,000 for pain and suffering, or for
If the person’s income is higher than the
actual expenses
budgetary entitlement, they are not eligible for
• business assets of up to $20,000 for
ODSP. If the person’s income is less than the
ODSP recipients who are self-
budgetary entitlement, they can get ODSP.
employed (plus any tools of the trade,
such as a special machine)
• loans made for an approved purpose, The government looks at different income in
such as approved business expenses, different ways. They do not include some forms
education, and training of income, like the GST credit, that lower income
• a prepaid funeral. people get. They include income from work at a
50% rate, because ODSP wants people to try to
pay for the things they need, and to be able to
Step 2: Needs test meet costs that are related to work. ODSP also
If a person’s assets are less than the limits, ODSP exempts voluntary gifts or trust fund payments of
will calculate what the person, or their family, up to $5,000 during a 12-month period (not just a
can get. Their family includes their partner or calendar year) for any purpose. (Gifts or voluntary
spouse and any dependent children. It does not payments from all sources are included in this
include their parents, even if they live with their limit.) Additional payments are permitted if they
parents. are for things related to the person’s disability.
On the other hand, ODSP does not exempt most
Here is what ODSP does: money from Workers’ Compensation and CPP.
ODSP decides what the individual or family
needs. This is based on a set budget for each Example: Carla
month. It is based on: Carla qualifies for a benefit of $979 a month.
• how many people are in the family This is the maximum for a single person who
• who is in the family (number of adults is a renter or home owner, without taking into
and children) account additional benefits such as special diet.
• the ages of children in the family. Because Carla also gets $300 from CPP each
month, then ODSP will only give her $ 679 a
ODSP determines an amount that the family month ($979 minus $300 equals $679). Carla also
needs for food, clothing and shelter. This earns $300 a month in net income from a part-
number is based on: time job. The rule is that 50% of her net income
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is ignored and 50% of it is counted. In this case, into a pension plan by having money
the reduction from the payment would be $150, deducted from their paycheque.
which is 50% of $300. So Carla’s monthly ODSP
cheque would be $529 (in addition to $300 from • Compensation programs usually
CPP and $300 from employment). pay benefits based on something
that happened to a person. For
example, a person who is hurt at
Answers to common questions work may get compensation from
the Workplace Safety and Insurance
about ODSP Board (WSIB). People can also
get compensation if they were
victims of a crime or of discrimination.
1. Is ODSP a pension?
Many people call ODSP a pension, but it
is not. ODSP is a financially-tested social 3. Why is family status important
assistance program. for ODSP?
Unlike ODSP, many pension programs
Programs like Old Age Security and the and compensation programs give bene-
Canada Child Tax Benefit have fewer rules. its to individuals. In other words, the person
The government tries to make sure all people gets the same benefit whether or not they
who qualify get the benefits. have dependants. However, for ODSP there
are additional benefits for dependants,
The ODSP program has lots of rules. People while the assets and income of spouses and
must meet many requirements to get partners are taken into account in deter-
support. People must apply to get ODSP. The mining eligibility.
government does not make a specific effort
to help find people who might qualify, but For ODSP purposes, a single adult over 18
officials may refer people to the program. They without dependants is considered as an
do not help people with their applications. independent applicant, even if she or he is
living with parents or other relatives. The
2. How is social assistance ‘family’ of a person for ODSP application
purposes includes only the applicant’s
different from a pension or spouse or children. So any person with a
compensation? disability who is 18 or older can apply for
ODSP. It does not matter whether they live
Social assistance is different from a pension
on their own or with their parents.
or compensation. It is for people who are
in need. This means that they do not have
If your relative is single, their application
enough income and assets to support
for ODSP will be simpler. If your relative
themselves. Governments only give social
has a spouse, their application will be more
assistance to people who can show they
complex. ODSP will decide if their relationship
need the money. To see if a person is eligible,
affects what benefits they could get.
governments review people’s finances.
ODSP that they have a spouse, or ODSP Here is what each one is, and how they work.
may decide that two people have a spousal
relationship. Once ODSP decides that a Means testing
person has a spousal relationship, it will A means test looks at a family’s circum-
look at the spouse’s income and assets. stances. It asks whether the family has the
If the spouse has a low income or few ‘means’ to provide for its needs. For example, if
assets, the person receiving ODSP benefits the family had a large vegetable garden, a means
can get the extra benefit amount. But if test might decide that they need fewer benefits
the spouse has ‘too much’ in assets or for food than a family without a vegetable garden.
income, ODSP may reduce the person’s A family that could cut wood for their wood stove
benefit or decide that the person no longer might get fewer benefits for heating costs.
qualifies for ODSP benefits.
In the past, many government programs used
means testing to decide if a person was needy
5. What can we do to make sure enough to be eligible for programs. Now few
other relatives and friends programs use means tests.
don’t do things that would Income testing
disqualify our loved one from With an income test, any person with an
ODSP? income below a certain amount qualifies for
the program. The income level depends on the
Make sure that other relatives and size of a person’s family. Many broad programs
friends do not give your relative money use an income test as the main way to decide
that would take them over the $ 5,000 who is eligible. Two examples of income tested
limit. If someone wants to give your programs are the Canada Child Tax Benefit
relative a gift, they could buy them (CCTB) and the Guaranteed Income Supplement
an asset that is exempt from ODSP (GIS) for seniors.
limits, like a car, a house to live in or a
medically necessary item. Needs testing
A needs test is a more complicated way of
Make sure that other relatives and friends deciding who qualifies. Programs that use
do not name your relative as a beneficiary needs tests set standards about what different
of life insurance, wills, or trusts without households need. They can give households
getting advice and advising your relative more or less money depending on their situation.
or you. If someone wants to name your The basic amount of money depends on how
relative as a beneficiary, they should usually large the family is, and who is included in the
set up a discretionary Henson Trust. family. The needs test can also give households
different amounts for the basic costs of living.
6. How do government For example, a family that must pay more for
rent and utilities could get extra money.
programs test financial need?
Governments use four different ways ODSP uses a needs test to decide how much
to test whether someone is in need: people need. To calculate the person’s need,
• Means testing ODSP subtracts a person’s income from a
• Income testing presumed amount that a household with the
• Needs testing (usually a same number of people, and the same “shelter
budget-deficit needs test) costs” (i.e. housing costs), would need. The
• Asset testing person will be eligible for ODSP if their income
is less than what ODSP says a household like
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theirs needs. This is how ODSP screens out ceiling. Putting a limit on the assets allows
people who could support themselves without people to have some money while they are on
ODSP benefits. benefits. It is one way to make sure that being
on benefits will leave a person some money to
Asset testing pay for unexpected costs that come up in daily
Assets are savings or property that can be easily life. For example, single people who qualify for
turned into cash. An asset test can show the ODSP are allowed to have up to $5,000 in assets
difference between two applicants with the same such as cash at any one time. The asset test for
income based on what property or savings each ODSP does not include a home that the owner
person has. Governments use an asset test to try lives in as an asset. An individual or family’s
to be fair when they assess what people need. first motor vehicle is also an exempt asset. A
second motor vehicle can also be exempt if the
Programs with an asset test limit what spouse needs it for work and it is worth less
assets people can have. This is called an asset than $15,000.
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• knows how to keep careful records and What to include in the Henson
accounts
• knows how to prepare tax returns or Trust provisions
arrange to have them done. When you set up a Henson Trust, either in your
will, which will be effective on your death, or in
an agreement made during your life, make sure
Possible problems with trustees
you include the following provisions:
When family members or friends act alone as
trustees, they do not always act in the best
interest of the person with a disability. When a Give your trustees the authority to
trustee is also a beneficiary of the trust, they can transfer money to your relative
be in a conflict of interest and not make wise or If you think that your relative might be capable
fair decisions. of handling her or his own funds, set up the trust
so that the trustees could transfer some or all of
It is not easy to remove a trustee, particularly a the money from the trust to them. The wording
trustee of an absolute discretionary trust like must clearly state, however, that the beneficiary
a Henson Trust. The only way a trustee can be cannot force the trustees to transfer moneys to
removed, other than by a court, is if the trust her or him, or else the absolute discretionary
document names a person who can remove nature of the Henson Trust will be lost. The
the trustee. You cannot rely on the courts to get clause should allow the trustees to be flexible
rid of a poor trustee. A court will only remove in dealing with improvements in your relative’s
a trustee if there is proof that the trustee did ability to manage money, and with future
not act in good faith. It is both difficult and changes to ODSP rules.
expensive to prove this.
If the estate, or part of it, is held by trustees in
Here is what you can do to make sure that the an absolute discretionary trust, the capital of
trust is managed properly and that the trustees the trust could be distributed among your other
make fair and reasonable decisions: daughters and sons, or grandchildren, or among
other relatives and friends, or to a charity, when
• Choose a group of trustees who the beneficiary dies. Under the law, this kind of
each bring different skills. provision in a Henson Trust would not make it an
• Choose at least one trustee who is asset for ODSP purposes. Also, it would not be
subject to claims by the beneficiary’s creditors,
not a beneficiary of the trust.
and the beneficiary could not spend it.
• Hire an affordable lawyer, financial
professional or trust company to
be the trustee or to be one of Name a beneficiary for income
several trustees. after 21 years
With most absolute discretionary trusts, the
You could also ask the Office of the Public income earned from the estate investments may
Guardian and Trustee to act as a trustee, be kept by the trustee on a discretionary basis
although this Office is reluctant to act if as well. In Ontario, under the Accumulations Act,
family members or friends are available. If the RS.O. 1990, c. A.5, the trustee can only keep this
Public Guardian and Trustee is the guardian of income until the beneficiary turns 18, or 21 years
property of the person with a disability but not after the death of the person who made the will,
a trustee of the trust, the Public Guardian and whichever is later. This is called the accumulation
Trustee tries to work with the trustees of the period. After that time the trust must pay out all
trust in the best interest of the person with a of the income each year either to the person with
disability. a disability or another substitute beneficiary.
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Relieve the trustee of the ‘Even relatively independent lives in the community.
Choose trustees who will be prepared to deal
Hand’ rule with social changes such as this.
Trustees of most trust funds must invest and
spend so that the trust is shared fairly between
the person who receives benefits during their Cover funeral costs
lifetime (the ‘life beneficiary’) and the people Many families worry about how to pay for
who will inherit the funds after the life beneficiary their loved one’s funeral. You can clearly give
dies. This is called the ‘Even Hand’ rule. the trustees the power to spend trust funds on
funeral expenses or pre-pay for the funeral. A
Inflation and taxes can eat into fixed funds. Since prepaid funeral will not affect your relative’s
most parents set up Henson Trusts to benefit ODSP benefits.
their relative with a disability, they do not want
the Even Hand rule to limit the support for the Ongoing support, care, planning
disabled person. Make sure that your will includes
a clause that specifically says that the trustees do and consultation
not have to apply the Even Hand rule. To make sure that the trustees are always
involved in your relative’s care, tell the trustees
to review your relative’s support services and
Avoid conflict of interest care plan. The trustees should do this regularly,
You need to think about what to do with money at least twice a year. Directing the trustees to
or other property left in the trust when your do this will put a duty on them to stay involved
relative with a disability dies. The people in your relative’s planning. You can also state
who inherit this money are called the residual in your will that your trustees should consult
beneficiaries. In many cases, a family’s other with the agencies and professionals providing
daughters and sons are the trustees or co- support and care to your relative, so long as
trustees of the Henson Trust and also its the provision also states that the trustees
residual beneficiaries. This creates a conflict retain an absolute discretion to make final
of interest and can sometimes mean that the decisions about spending.
trustees choose not to spend money on the
relative with a disability so that more money
will be left in the trust for them. To minimize Answers to common questions
this problem you could name at least three
trustees of the fund, and require that any two about Henson Trusts
trustees can override the third one.
1. After I die, can my trustees use
Give the trustee flexibility a Henson Trust or Inheritance
Henson Trusts give the trustees total flexibility.
This allows the trustees to respond to changes Trust to give my relative the
in social assistance legislation, regulations and same kinds of supports that I
services. Think about what policies and trends
lie behind the statutes and regulations. Choose
am providing now?
trustees that can cope with change. Give the Yes. They can do so as long as there are enough
trustees enough flexibility to deal with changes assets in the trust to provide payments, or to
in policies that affect your loved one with a buy items and services. Under the ODSP rules,
disability. For example, for many years the trustees can provide the same supports as a
trend has been to support people who would parent, or other relative, could provide while
have been institutionalized in the past to live they were alive.
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2. Can I leave my home to my If you decide to buy a home, make sure that it
is an affordable home. Check to see that it is
relative? Can I buy a home for close to the supports your relative needs and
my relative? Can my trustees to their educational, employment, social and
recreational programs, as well as any other
buy a home after I die? activities they are part of.
A person receiving ODSP is allowed to own the
home where they live (the principal residence).
So, if they will live there, you can leave your 3. Can the trust own a home?
home to a family member who is receiving The trust can buy a home for the person with
ODSP. You can also buy a home for them to a disability. The trust can also pay capital
live in. And you can let your trustees buy them expenses required to maintain the home, such
a home after you die. as fixing the roof. Spending trust funds in this
way will not affect the beneficiary’s ODSP
If you want to do this, you need to plan benefits. If you want trust funds spent in this
carefully. Get advice. way, give the trustees power to do so. You
could also give the trustees the power to rent
Make sure that any money you put in a trust part of the home to another person who could
for your relative will be able to pay all of the share the costs with your relative. This has to
expenses for the home. Most of these are be considered carefully, however – it will be an
legally the responsibility of whoever owns awkward situation for the trustees to deal with
the home. If your relative owns the home, the if your relative turns out to be incompatible
expenses would come first out of the ODSP with the other person, especially if the other
shelter allowance and then out of the $5000 person also has a disability.
they are allowed to receive within 12 months.
Remember to calculate how much it will cost However, it may not be practical for the trust to
for the mortgage, and for taxes, insurance, buy property for your relative with a disability
utilities, upkeep, furnishings and repairs. If the because it will be responsible for the property
home is a condominium, calculate how much taxes, all utilities and ordinary decorating and
the monthly condominium fees will be. The repairs. Make sure that the trust will be able
ODSP shelter allowance will cover some of to afford these expenses. These expenses will
these expenses, but they do not provide much be covered partly by the ODSP shelter subsidy
money. Even if you or your trustees can provide if your relative is responsible for them as a
extra money for these costs, ODSP limits how tenant, but what it provides is quite modest.
much you can give.
Finally, remember that what may seem like a
suitable home for your relative now may not
Another important thing to consider is how be suitable at all, or may not be what he wants,
well your relative will get along in their own in 30 or 40 years. If your trustees are to buy
home. For example, can they live on their own a home or maintain a home for your relative,
and are the supports in place to ensure that this they should also have discretion to sell it and
situation will work out well? Will your family buy another, or if necessary to use the funds to
member need support to live in the home in meet other needs of your relative.
the future? You may be able to find an agency
that will give these supports. If your relative
does not need more than a limited amount of 4. Who should own the home?
support or supervision, buying a home can be You have many choices. This is a big decision
a good idea. Talk to the disability organizations and can be very complex. Before you arrange
which provide the services, and talk with your for a house for your relative, get legal and
trustees. financial advice Here are your options:
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Who could Will this affect ODSP When is this option What should I think about
own the benefits? a good idea? before I make this choice?
home?
Your relative AODSP does not count This is a good idea when As the owner, your relative would
could own a principal residen your relative is most have to pay for all of the costs for the
the home ce as an asset. comfortable living in their home. They would also be allowed to
where they own home and has the sell it.
live. This capacity, with ongoing If they sell the home, your relative
is called a and secure supports, to would receive the proceeds from the
‘principal remain there for a long sale. If this exceeded their asset limit
residence’. time. of $5000 they would no longer qualify
for benefits unless they purchased
another home.
You could The ODSP shelter This option is a good Many parents charge their sons and
own the allowance can pay the idea where secure daughters little rent. Canada Revenue
home where rent, as long as the rent is arrangements are in place Agency (CRA) has decided that parents
your relative not too high. for the future and the who charge low rent are not landlords.
lives. In this home is judged the best These parents do not have to report
case, they are place for the relative to the rent as income, and they cannot
your tenant stay. claim a loss if the home costs more to
and you can maintain than the rent they get.
charge them
rent.
A Henson In this case, the person This is a good idea in All the decision-making that goes into
Trust or receiving ODSP is called situations where deciding to arrange a Henson Trust
another kind the ‘beneficial owner’. • a Henson Trust is the also applies here.
of trust They should be able to best option,
get money from ODSP for • there are no alternative
insurance, taxes, utilities secure arrangements
and other costs, if they available, and
are responsible for these • it is still in the relative’s
payments as a tenant of best interests to remain
the trust. in the home.
A disability In this case, your relative This is a good idea when If you want to do this, meet with the
organization would be a tenant of the there are no secure family agency. Find out what policies it has
that will agency. arrangements available about owning homes. Make sure you
provide and it is in the best are confident that the organization is
services to interests of the person making a long-term commitment to
your relative. with disabilities to remain your relative.
in the home.
Your relative It is possible to do this This is a good option If you make this kind of arrangement,
could be under the ODSP rules, as where there are secure be sure to say in your will what you
joint owners the home would be the family arrangements in want to happen in these different
with another principal residence of place, family members situations.
family the ODSP recipient. The are comfortable with the
member, siblings could share the arrangements, and it is
such as a expenses of the home, best for the person with
sibling. so long as the expenses a disability to stay in the
borne by the ODSP home.
recipient were within the
limits of the ODSP shelter
allowance.
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11. What is the Registered in the person’s lifetime. To get the Disability
Savings Bond, the person with a disability or
Disability Savings Plan? Will their family does not have to contribute to the
it help my relative with a RDSP account. A child who qualifies for the
Disability Tax Credit and who lives in a low-
disability? Is there anything income family will also get Disability Savings
I should do to help my relative Bonds.
prepare for it? Remember that your relative must have a
The Registered Disability Savings Plan
Social Insurance Number and must file an
(RDSP) was announced by the Government
income tax return to get the Disability Tax
of Canada in its 2007 Budget. When we
Credit, the Disability Savings Bond and to
wrote this booklet, complete information
set up the RDSP account. To prepare for the
about the RDSP was not yet available. In the
RDSP you should help your relative qualify
Budget, the Minister of Finance, the Hon-
for the Disability Tax Credit and get a Social
ourable James Flaherty, promised that the
Insurance Number. If your relative is an adult,
RDSP would begin in 2008.
you should also help them file an income tax
return. Filing an income tax return is also a
The RDSP is based on the report of an expert
good idea because it will help your relative
panel. RDSPs will be a new kind of registered
get money from the GST credit and Ontario
savings plan. They will allow you to save for
the future of your relative with a disability. As tax credit. These credits are not taken out of
with other registered plans, the investments their ODSP benefits.
within the RDSP will grow tax-free until
payments are made to your relative. When
you contribute to your relative’s RDSP, you will 12. Can I give my relative money
not get a tax deduction, but the Government to start a business?
of Canada will give Grants to match some or ODSP rules say the things a person needs
all of your contributions. There will also be to run a business are exempt assets. For
Bonds for low-income families with children example, a computer, a sewing machine, or
under 18, and for low-income adults with electrician’s tools could be the tools needed
disabilities. for different kinds of businesses. Businesses
can also have up to $20,000 of exempt assets
The full details of the RDSP are not final. if the business needs supplies, including raw
However, the Government has said that only materials, or has an inventory.
people who qualify for the Disability Tax
Credit will be eligible for an RDSP. Low-income It is very difficult for people receiving ODSP
adults who qualify for the Disability Tax to develop a business because the rules
Credit, or their families, should open an RDSP about bookkeeping and reporting to ODSP
account. The Government will contribute are very complex. This option should only
money into the RDSP account. The government be considered in very specific circumstances
contribution is called a Disability Savings where the development and conduct of a
Bond. The government will contribute Bonds small business is in the clear best interests of
of up to $1,000 a year, to a maximum of $20,000 the person with a disability.
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collections such as art or other valuable • What age is your family member? This
collectibles such as coins or stamps. will affect what benefits and services
they may be eligible for and how long
Then list the life insurance and pension benefits they may need support.
that your family will get after your death, and
any disability benefits that you would get if you • What type of disability does your family
became disabled. If you have these kinds of member have? How does it affect their
benefits through work, carefully find out what ability to perform activities of daily
they are. If you have any questions, talk to your living? This will help you identify their
employer’s human resources department, your future needs.
union, or an advisor with proven expertise in the
areas that you have questions about. • Which social service and health
organizations, professionals, and staff
Next, list all of your debts. Include your are most knowledgeable about your
mortgage, loans, and any amounts that you family member’s goals and needs?
owe to family members and friends.
• Can you get any information about the
future prognosis for your family member’s
Now calculate how much you will need to take
disability? This will help you identify what
care of your dependants. For more information
needs they may have in future.
about how to do this, read the next section.
• What education and training has your
If you think your estate may not be large enough family member had?
to meet your family’s needs, consider buying
more life insurance. If you think you will not • What is your family member’s
have enough income if you become disabled, employment history?
consider buying disability insurance.
• What past and current sources of income,
Keep all of these lists up-to-date and make sure especially disability-related income such as
your trustees and attorneys know where the the Ontario Disability Support Program, has
lists are. Trustees and attorneys cannot follow your family member had? This will help you
your wishes if they do not know what you have. think about the estate planning discussed in
If your trustees or attorneys do not know about this booklet.
investments or insurance policies, your family
cannot use them! • Where has your family member lived in
the past and where are they living now?
Do they live in a group setting, care facility,
Make sure that your plan will supportive living situation, or rent-geared-
meet your relative’s long-term to-income housing? Where they live is
a large part of figuring out what support
needs they may need in the future.
Consider developing a personal plan for the
future with, or for, your family member with • What are their goals for things such as
a disability. When you know what they want, education, employment, or independent
build your financial plan to help them meet their living?
personal plan.
• What are their most significant needs, for
To begin to develop a personal plan, start with things such as transportation, personal
basic information. Here are some factors you care and supervision, assistive devices and
may want to consider: supplies, and medications?
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• What skills do they have and what are Buy life insurance
their limitations? For example, can they Before you buy life insurance, carefully consider
manage money and property? Can they what is available. Decide what kind of insurance
make important personal decisions? meets your family’s needs and what kind you
can afford.
• What personal relationships, including
family, friends and service providers, Some families that do not have a large estate use
are most important in the life of your life insurance to build up a fund for their relative
family member? with a disability. They do this by naming the
relative as the beneficiary of their life insurance.
• Does your family member have a spouse,
partner or child, and might they have
This is not a good idea, especially if the relative
dependants in the future?
is receiving, or may need to receive, ODSP
• Are other family members or friends benefits. Even if your relative does not need
planning to provide for the person with ODSP, making them a beneficiary is only a good
a disability in their estates? idea if you are confident that they can manage
their own money effectively.
It is very difficult to know how your family
member’s life and hopes could change in the To get around these problems, you could name
future. This is why the personal future plan your estate as the beneficiary of the insurance.
should be flexible. It must allow for changes you If you do, your will can say what to do with the
cannot expect. money. Or you can put the money into an inter
vivos trust (see below). The trust agreement
A good resource to help you develop a personal will tell the trustee how to spend the insurance
plan for this future is a guide called Safe and money.
Secure. It was written by the Planned Lifetime
Advocacy Network (PLAN). The guide can help Set up an inter vivos discretionary
you and your family member with a disability in
developing a personal plan for the future. See trust
Part 5 of this booklet for how to contact PLAN Most relatives of persons with a disability use
and other community resources. their own assets to help their relative who is
receiving ODSP. In some cases, parents may
want to set aside property to care for their
relative while they are alive. This kind of trust is
Building up your estate called an inter vivos discretionary trust. Here are
Here are some of the things you can do:
some reasons why parents or other relatives set
• Buy life insurance to increase the
up inter vivos trusts:
amount of money in your estate.
• One parent has a large amount of
• Set up a tax shelter or invest money
money from a divorce settlement.
in ways that could support your
• A parent has a large estate and
dependants.
wants to save taxes.
• Buy annuities.
• A parent wants to judge how a
person acts as a trustee.
This section includes general information about
each of these choices. Before you make any If you decide to set up an inter vivos trust, make
investments or other financial decisions, be sure you set up the trust in a way that will not
careful and get good advice. Ask about things affect your relative’s ODSP benefits. The trust
like fees, long term commitments, and if there is should give the trustees absolute discretion to
any risk of losing the money you invest. deal with the assets. This means that only the
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trustees can make decisions about the money disabilities, particularly intellectual or mental
and your relative does not have direct access health disabilities, even when they are adults.
to the money. The trust agreement should also Parents think they can manage their child’s
say that the trustees can keep in the trust any property and make decisions about their health
income that is not paid to your relative. care. This is often a mistake.
If you decide that your relative will not need In Ontario, the law presumes that every person
ODSP benefits and that the family will take care over the age of 18 can manage their own affairs
of their needs fully, the trust could be for the and make their own decisions about their health
benefit of the person with a disability alone. In care. Adults have legal guardians for financial
this case, the trustees can pay both income and and personal decision-making only if one is
capital to, or for the benefit of, the person with a appointed for them by the Courts, or if the Office
disability. The trust could last until your relative of the Public Guardian and Trustee becomes
reaches a certain age, or for their whole life. The their financial guardian under the Substitute
trust could say that the capital in the trust could Decisions Act.
be transferred to the person with a disability if
the trustee believes they can handle it. For many adults with an intellectual or
mental health disability, this does not create
If you establish an inter vivos trust primarily to a problem. With careful explanations and
save income tax, get good advice. You must supports, the person may be able to make her
be very careful to take into account the income or his own decisions. If necessary, ODSP can
attribution rules set out in sections 74, 75 and 76 appoint a person, such as a parent, sibling,
of the Income Tax Act. or case worker, to assist the person in the
management of their ODSP without requiring
the person to seek legal guardianship. Similarly,
Buy annuities if a person is incapable of understanding a
If you use some or all of your assets to buy an particular health care decision, the next of kin
annuity, you could give your relative a monthly can usually give the required consent under
income for the rest of her life. Be careful. Her Ontario’s Health Care Consent Act.
ODSP benefits will be affected if she gets
money from the annuity. ODSP counts money Serious problems can arise, however, for adults
from annuities dollar-for-dollar as income. with intellectual or mental health disabilities
where:
Annuities are not flexible. Once you buy an s there is major conflict among their
annuity, nobody needs to make any other families, friends or support agencies
decisions. This means that nobody can change about important decisions in their
the terms of the annuity. If your relative’s lives, and
circumstances change, nobody can change how s the adult is not capable of under-
much income they get from the annuity. standing the nature and consequences
of decisions that have to be made.
Other things you can do to meet
There may be conflict about where the person
your relative’s needs will live, who the person will associate with,
or whether or not the person will have a
certain type of health care treatment. If
Set up a legal guardian for your counselling and discussion fail to resolve
relative these issues, legal guardianship through the
Many parents assume that they are the legal courts may have to be sought to protect the
guardians of their sons or daughters with person’s rights.
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Other reasons for pursuing legal guardianship disability organization or service provider, ask if
are when: they have a ‘peer support’ or ‘parent-to-parent’