Estate Planning For Families With Special Needs
Many parents that I’ve talked to are very active in saving for their children with special needs. Especially with the Registered Disability Savings Plan (RDSP), their attention is focused on getting the disability savings grants and disability savings bonds from the government. However, having the proper estate planning for the parents is just as important and should not be neglected.
If you are a parent of a child with disability, should you pass away, have you considered the following?
Will your child have enough financial resources to continue his/her living?
You probably are providing for your child at this moment, but how will your child be able to maintain the same standard of living without your income? Do you wish the contribution to the RDSP to continue after you pass away? If you are not confident that your current savings is enough to provide for the child’s future, one way to make up the difference is to setup a life insurance policy. Life insurance is a contract where the insurance company will payout the death benefit to your child when you pass away. The benefit is tax free, where your child may use it to maintain his/her current standard of living. (I recently shared a personal experience of how life insurance has helped a family.)
Will your inheritance affect the government benefit?
Although the intention of leaving an estate is out of care, and out of love, when they are not carefully planned, it could lead to claw back of other government benefits. For example, the Ontario Disability Support Programs (ODSP) has an asset limit of $5,000. That means if the disabled child has more than $5000, the government may terminate the benefit, but there are exemptions. According to the current ODSP rule, assets within the RDSP are exempted. The segregated fund could be another consideration when handling inheritance for ODSP purposes, the terms and conditions could be viewed at http://www.mcss.gov.on.ca/documents/en/mcss/social/directives/odsp/income_Support/4_8.pdf
Who would continue to manage the financial assets for your child?
Some disabled persons may be lack of capacity to manage their own finance. If that is your case, upon your death, you would want someone you trust and reliable to look after the financial aspects for your child. As this is truly a long term commitment, it is important to find someone who is willing and have the capacity (in terms of time, energy, financial knowledge.) to act in the best interest of your child. Having a will written properly is essential as this ensures your inheritance and the financial assets will be directed in the ways that you wish. (Here’s one of my posts that talks about “What would happen if the RDSP account holder passes away?“)
These planning tips do not only apply to parents and child relationship, it could also applies to people with special needs and their current providers in general. For more ideas on estate planning for families with special needs, here are some details I found from Canada Life. (http://samuelconsultant.com/wp-content/uploads/2014/03/92_1_provide_for_special_needs_e.pdf)
- Disclaimer: Image Courtesy Grant Cochrane/ FreeDigitialPhotos.net