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Planning For Beneficiaries With Disabilities

If you have someone that you plan to leave money or assets to who has special needs or a disability, special consideration should be given on how to deal with his or her interest in your Estate. This is particularly true if that individual is receiving Ontario Disability Support Program (ODSP) benefits. As you may be aware, qualification for ODSP benefits depends not only on the individual’s medical status, but also on their income and asset values. As a result, if you leave such a beneficiary too much money under your Will, or do not leave it to them in the proper manner, he or she could very well lose their government benefits and be forced to live off your gift.

Government guidelines provide that the first $10,000.00 a person on ODSP receives by way of voluntary gift in any twelve-month period is excluded from the income test. This means that in addition to the money received from ODSP, a beneficiary may receive payments up to $10,000.00 every year, to be used in any way he or she chooses.

In addition to the aforementioned payments, certain categories of assets are excluded from the test used to determine eligibility of ODSP benefits. Regardless of their value, these excluded assets include:

  • a principal residence;
  • a vehicle; and
  • first and last month’s rent.

Therefore, since these assets are exempt, the trustee many use funds that are designated to the beneficiary under the Will for the purposes of purchasing any of these assets without impacting his or her entitlement to ODSP benefits.

A simple solution exists to the issue of remaining qualified for ODSP on the one hand, and limiting a beneficiary’s gift under a Will on the other. A “Henson Trust” is the term often used to describe a discretionary trust designed to benefit a disabled individual in such a manner as to protect that disabled individual’s entitlement to collect means-tested government benefits. To put it simply, putting an asset into this type of trust prevents the asset from passing directly to the individual and, as a result, the asset does not impact the individual’s eligibility for ODSP benefits.

The important aspects of a Henson Trust is that the trustees must have absolute discretion with respect to the allocation of income and capital to the disabled beneficiary so that the assets in the trust and income generated from the trust investments cannot be said to have vested in the beneficiary. Accordingly, it is important to seek the advice of an experienced estates lawyer in order to ensure that the Henson Trust is drafted properly.

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