This blog was contributed by Elizabeth Bozek, B.Sc. (Hons), LL.B., Estate and Trust Consultant at Scotia Wealth Management in Toronto.
Estate planning for beneficiaries who receive Ontario Disability Support Program (“ODSP”) has been a careful balancing act to ensure entitlement to the benefits is preserved. Some relief has finally been announced in the August 1st changes to the Ontario Disability Support Program.
In determining eligibility for ODSP payments, applicants are subject to strict limitations on the assets they are entitled to have and income they may receive. Support payments were also capped. These restrictions have unfortunately ensured that many ODSP recipients remained on or near the poverty line. The recent changes include increases to the asset limits and removal of certain payments from the calculation of the maximum asset and income to which ODSP applicants and recipients are subject in order to qualify for ODSP.
Prior to August 1st, any damages or compensation that an ODSP recipient received for pain and suffering as a result of injury or death, or expenses incurred or to be incurred as a result of injury or death, were exempt from calculation of income or assets of the recipient. The maximum exemption was $100,000. The same restriction applied to the receipt of an award for damages under s. 61(2)(3) of the Family Law Act to compensate for loss of guidance, care and companionship as a result of death or injury. Similar restrictions applied to amounts received as compensation for non-economic loss under section 46 of the Workplace Safety and Insurance Act, 1997 or section 42 of the Workers’ Compensation Act. As of August 1, 2017, these amounts are fully exempt from inclusion as income (s.43(1)) and assets (s.28(1)) of the ODSP recipient. This change is significant for recipients, as it ensures that personal injury claimants can accept a settlement and keep their ODSP entitlement.
Most significantly for estate planning purposes, the Regulations also indicate that, as of September 1, 2017, the following changes will be made:
- a cash gift or other voluntary payment, including those from a trust or life insurance policy, of up to $10,000 per year shall not be included in the recipient’s income, an increase from the previous limit of $6,000 (s.43(1).13);
- a new subsection s.43(1)13.1 will be added providing that a gift in any amount will not count towards the calculation of a recipient’s income in a year if the proceeds of the gift are used to purchase a principal residence, buy a vehicle, or pay first and last month’s rent; and
- whereas previously, entitlement to ODSP was limited for a single individual to having a maximum of $5,000 in assets, and for couples to a maximum of $7,500 in assets, the 2018 Ontario budget increased limits to $40,000 and $50,000, respectively (s. 27(1)).
These are welcome changes to those who rely on their ODSP benefits, allowing recipients to build a better financial safety net than was previously permitted. However, they do little to ensure recipients remain above the poverty line, especially when considering the increase to the benefit rates was only 2%. Nevertheless, those undertaking estate planning discussions with clients who want to provide for children or other beneficiaries who receive ODSP may find the extra breathing room helpful. These amendments allow for some flexibility in preserving the beneficiary’s benefits while maximizing their inheritance.