How to leave an inheritance to someone on ODSP

Regular readers of this blog know that I especially love finding articles by knowledgeable people that are readable and straightforward, because I can share them with you and know that you're getting some valuable information. I have found one such article - click here to read it - from Ottawa lawyer Donna Neff.

In this article, Ms. Neff gives some practical information about how to leave an inheritance to someone who is, or in the future likely will be, receiving Ontario provincial benefits due to a disability. The issue there is generally how to leave an inheritance without causing the beneficiary to be cut off from valuable provincial benefits. Obviously you would want to leave an inheritance to better someone's life, not to cause difficulties.

Although this article is specifically about Ontario, all provinces have similar benefits and family members across Canada wonder about leaving inheritances to children and grandchildren with disabilities without messing up their benefits. In all provinces but Alberta, the Henson trust discussed by Ms. Neff is an option to be considered.

I highly recommend this article to anyone who has a disabled beneficiary in his or her life.

Seminar for parents on RDSPs and Henson trusts

I received this note on LinkedIn, and it looks like a fantastic opportunity for the parents of a disabled child (of any age) in Ontario to get some great information. Here is the note I received:

"Presentation next week on RDSPs & Henson Trusts. February 6th at 6pm at the Living Arts Centre in Mississauga. RSVP or more info 905-896-8373. Know a parent with a disabled child? Forward this information to them. They will learn about all the government funding available and how to put their minds at ease to support their children."

The note was posted by Jennifer Black, Wealth Manager at Dedicated Financial Solutions. I don't know Ms. Black so I can't vouch for her personally, but if she works within the financial industry she should be a great source of information about these topics. I'd appreciate any feedback from anyone who attends this seminar.

For those who may not know, a Henson Trust is a specialized trust set up in the wills of parents with a disabled child. The purpose of the trust is to ensure that the disabled child does not lose provincial support benefits because of the inheritance.

New rules add incentive to open a disability savings plan

Click here to read an article from the Globe and Mail about registered disability savings plans (RDSP). Recent changes to the rules may impact estate planning for the families of disabled individuals.

RDSP as estate planning tool: worthwhile?

In this blog entry, Jasmine Sweatman looks at whether there is value in using an RDSP (registered disability savings plan) as an estate planning tool. I agree with what she has said, but have to point out to Alberta readers that we cannot use Henson trusts in Alberta. Click here to read the article.

Information about RDSPs

I know many people are still looking for reliable information about the Registered Disability Savings Plan (RDSP) as it always takes a while for the details of new programs to become familiar.

Click here for detailed information including:

• what is an RDSP?
• who can open and contribute to an RDSP?
• how much can be contributed to an RDSP?
• can an RDSP be transferred to a new plan?
• how do RDSP withdrawals work?
• what is the "ten year period rule" and what events trigger the rule?

There's also an RDSP calculator on that page.

If I open an RDSP for my disabled child, will he/she lose government benefits?

The Registered Disability Savings Plan (RDSP) has been around long enough now that most people involved with disabled adults are aware of the general operating rules. However, I do still get quite a few questions from parents who wonder if they might accidentally cause their children to lose their government disability benefits by creating this kind of account.

Provincial plans pay eligible handicapped individuals a monthly support amount, as well as offering free medical, dental, optical and other services. Obviously this is very important to most families as a financial benefit for the handicapped child. However, the provincial plans impose a financial test on the handicapped individuals so that if the individual has either more assets or more income than is allowed, they lose their benefits.

While parents are interested in setting up an RDSP, they want to make sure they don't lose those provincial benefits.

The Canada Revenue Agency has clearly stated that the money paid into an RDSP and the earnings on that money are not counted as an asset for the purpose of figuring out what a handicapped individual owns. In other words, opening an RDSP will NOT cause your child to be cut off from provincial benefits.

A few highlights about RDSPs:

• - a handicapped person is the beneficiary of the RDSP


• - there can be only one account per beneficiary


• - the account can be opened by the beneficiary him/herself or by the parents or legal representative of a beneficiary


• - the beneficiary must live in Canada


• - the maximum amount that you can contribute to the RDSP is $200,000 during the beneficiary's lifetime, but there is no limit per year


• - contributions put into a plan are not tax-deductible


• - anyone can put money into an existing RDSP


• - contributions must stop the year the beneficiary turns 59


• - there are matching government grants that are based on family income


• - the government matching grants can be as high as $70,000 during the beneficiary's lifetime


• - there are additional grants (bonds) for low-income families


• - when the beneficiary takes out money, he or she does not pay tax on the amount that the family contributed; he or she only pays tax on the portion the government contributed, and earnings on the government contributions


• - when the beneficiary dies, any money left in the RDSP must go into his or her estate.

If you want to know more about these, talk to your banker or your financial planner.