Jack came into my Ottawa office last week to talk about his Will. He seemed upset. He was particularly concerned about leaving a gift to his grandson, Billy, who had a disability. He and Billy had always had a very special relationship and he wanted to be sure Billy would benefit from his estate.
Another family member had told Jack that once Billy turned 18, due to his disability he would likely start receiving ODSP. If he received an inheritance, Billy might lose his ODSP.
“What is ODSP?” Jack asked me, “Can Billy really lose his disability income if I leave him money?”
I explained to Jack that ODSP stands for Ontario Disability Support Plan. ODSP is meant to help people with disabilities who are in financial need pay for living expenses.
I also explained that if Billy was receiving ODSP when Jack died, having too much of an inheritance left to him could result in Billy losing his ODSP benefits. Unless the money Jack was going to leave Billy was enough for Billy to manage without ODSP, Jack needed to consider other options such as:
- Include a special trust in his Will often called a Henson trust so that Billy’s share of Jack’s estate could be held in trust and not affect Billy’s ODSP benefits.
- Direct in his Will that on his death, Billy’s share is to be deposited into Billy’s registered disability savings plan (RDSP) if he has one. However, there are limits on how much can be deposited into an RDSP. Before Billy could have an RDSP, he would have to qualify for the Disability Tax Credit (DTC).
- Limit Billy’s gift to no more than $5,000. As long as Billy has no other assets, this amount should not affect his ODSP benefits.
- Include a gift to Billy that is less than $100,000 which Billy could protect after Jack’s death. Billy would need to meet with a lawyer to have a special kind of trust created. Often called a Disability Expense Trust, this type of trust must comply with certain strict rules such as a maximum value of $100,000. The cost of creating this type of trust can exceed the cost of including a Henson trust in Jack’s Will.
- Remove Billy from his Will.
If you want to leave a gift to a loved one who has a disability, careful consideration of these options is essential. Make an appointment to meet with me today so that we can discuss how best to provide for your loved ones.
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Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.