Parents of a child with a disability are required to provide lifelong treatment and core support to their children whether it be financial, physical or emotional. A great concern for parents is how to effectively plan for the care and protection of their child after the parents pass away. In fact, special considerations are essential for parents of a disabled child or adult to ensure the child’s Ontario Disability Support Program’s (OSDP) benefits are not affected by their estate planning. Guidance from a professional advisor could provide great aid in avoiding these situations.
If a family member with special needs is receiving Ontario disability support benefits (ODSP), and if they are left an inheritance, that inheritance is considered an asset and will disqualify them from benefits unless special provisions are made in the parents’ Will.
These special arrangements are essential to ensure that your child will be given the extra care they deserve, and that inheritances will not be wasted. Specialized legal counsel is necessary to ensure that the drafting of Wills follows the court-tested arrangements required, and to continually consider any changes in provincial regulations and new case law.
The popular and preferred option is the use of an Absolute Discretionary Trust (commonly referred as a “Henson Trust”) created under the parents’ Wills. The Henson Trust allows their Estate Trustee complete discretion over the trust so that he/she may continue to pay the necessary expenses of the disabled child. As a result of the Henson Trust, families have the assurance that their disabled child will be provided for in the years to come while knowing that he/she cannot compel the estate trustee to make payments.
The child’s ODSP benefits shall not be compromised since the funds held in the Henson Trust are not considered his assets for ODSP purposes; that is because the Estate Trustee has absolute discretion in the management of the trust. Furthermore, the child’s income from the Henson Trust for non-disability related expenses, such as food, clothing, housing and entertainment, can be substantially supplemented without suspending or affecting the ODSP benefits.
Also, depending on the parents’ wishes and in suitable circumstances, the Henson Trust may also allow for income sprinkling by authorizing the Trustee to “sprinkle” income among several beneficiaries.
ODSP guidelines recognize the Henson Trust as an exempt asset of the disabled child and as a result, it remains the most valuable option available as it represents a safety net for the child after the death of his parents.
For further information, please contact us.