Inheritance for Disabled Persons: RDSP and Henson Trust
I met a person with pre-long disability awhile ago. With the great support from the Canadian government, he is receiving benefits from the ODSP (Ontario Disability Support Program). Unfortunately, his father is extremely sick, and doctor predicts that he might only survive for a short period of time. While going through the emotional hardship, there is also a huge concern that when this disabled person inherits the estate, would that affect his rights in receiving the ODSP benefits.
The ODSP is a government programs to support disabled persons. It provides benefits such as income supports and employment support. The Ontario Disability Support Program Income Support helps people with disabilities who are in financial need pay for living expenses, like food and housing. However, there are limits to the amount of assets that a disabled person could have. Disabled person must not have asset over $5,000. (Note: Certain assets are exempt from the rule. For full details on ODSP, please refer to: http://www.mcss.gov.on.ca/en/mcss/programs/social/odsp/income_support/assets.aspx)
In the case when inheritance is more than $5,000, what are the options?
One option is to rollover the inheritance into a RDSP, because RDSP asset are not counted toward the $5,000 limit. Withdrawals are not considered income by ODSP; however, once the withdrawal is received by the beneficiary, the $5,000 asset limit would then apply. Also, there is a lifetime contribution limit of $200,000. Since the inheritance is a one-time deposit, the total amount of Canada Disability Savings Grant (CDSG) being attracted might be lesser when compared to smaller contributions being made annually.
Another tool worth considering would be to setup a trust for the disabled person. Attached are two pieces of writing about using trust and RDSP in estate planning. Hope this would be helpful.