I recently met with Kate (not her real name) at my law office in the Kanata-Stittsville area of Ottawa. She explained to me that her grandmother had recently passed away and left her a cash gift of $100,000. Kate was concerned about what effect the gift may have on the benefits she receives from the Ontario Disability Support Program (‘ODSP’). She had not yet received her gift but, acting on the advice of her father, she had made an appointment to meet with me sooner rather than later.
I told Kate that coming to me before receiving her gift was the right thing to do. It was unfortunate that Kate’s grandmother had not been advised to include a Henson Trust in her Will for Kate’s benefit. There are, however, some steps that Kate can take to protect her ODSP benefits.I explained to Kate that one solution is what is commonly known as a ‘disability expense trust’ or a ‘regulation trust’. However, to make use of this kind of trust, certain conditions must be met. The capital in a disability expense trust must be derived from an inheritance or the proceeds of a life insurance policy. The cumulative total for all such trust funds as well as the cash surrender value of any life insurance policies owned by the ODSP recipient cannot exceed $100,000.
To ensure that the recipient’s ODSP benefits are not affected, a disability expense trust must meet the following requirements:
• Payments out of the disability expense trust must be to or for the benefit of the ODSP recipient;
• Payments must comply with the ODSP rules in terms of payments out of the trust and what they are used for;
• The total assets in all disability expense trusts for the same recipient cannot exceed $100,000 at any time including interest or other revenue earned by the trust or trusts and including the cash surrender value of any life insurance policies owned by the recipient. This could be an issue for Kate if she were to receive another inheritance before the trust is spent down.
Generally, an ODSP recipient has just six months from receiving the inheritance or life insurance proceeds to set up the trust. Kate was very relieved to learn that this was an option available to her.
Are you on ODSP and concerned about how an inheritance could affect your benefits? Email firstname.lastname@example.org or call 613.836.9915 to make an appointment to meet with me at my Ottawa law office. We will review your unique situation and discuss what options are available to you to protect your ODSP benefits.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.