Many of us are speaking to our clients about estate planning or supporting clients who are speaking to their other advisors about estate planning.  Have you thought about the questions that we pose to such clients.   Have you thought about your estate plan? Is  your will drafted as per your wishes and needs? Do you have a power of attorney in place? Who will do what in case something comes up? Is your family prepared in case of…? What if…? These questions could be overwhelming for your client. However, tackling them with the right balance between need for information and empathy could make the experience much less stressful for them. Many clients do not know what options are out there and rely on you to help them find the right solutions to achieve their goals and objectives.

Challenging family situations

When the family circumstances are challenging, its critical  to focus on the possibilities available to address the issues that matter.  As an advisor, are we getting the right information? Do we really understand what our clients wish to achieve?  Is it an immediate solution or one for after they are gone?  The short answer is, not always. Its within human nature to try to solve things fast, but how effective is this if we do not know the full scope of the situation or the solution that they are looking for?

Today I would like to highlight  a situation that I have found to be very beneficial when utilized under the right situation.  It has to do with a client who has a family member with a disability. This can be a major concern for our clients.  They obviously wish  to protect their  loved ones, but we need to focus on what is it that they are looking to solve for.  Who is doing what today and how the various pieces fit together.  What might required in the future?

For clients with  a family member who has a disability, a Qualified Disability Trust (QDT) may be a great option.

a QDT in a nutshell is:

• a legal vehicle that grants benefits to the beneficiaries that suffer from a disability
• the QDT is a testamentary trust, and get triggered once that person passes away
• Unlike other types of trusts which are taxed at the highest marginal rate, a QDT can be taxed at a graduated rate, leaving more assets in the hands of the person needing the

The primary focus of this trust is to protect the beneficiary by fulfilling its objective but at the same time maintaining their eligibility for provincial disability benefits. However, the person needs to be eligible for a disability tax credit (DTC).

As many of you would know, to qualify for the Disability Tax Credit (DTC), a medical professional will need to confirm that you have a severe and long-term impairment in one category, significant limitations in two or more categories, or if you undergo therapy to maintain a vital function and this limitation exists nearly all the time (typically at least 90%) and has persisted or is anticipated to persist for at least 12 consecutive months.

Marked Restriction:

• Walking
• Mental Functions
• Dressing
• Feeding
• Eliminating
• Hearing
• Speaking
• Vision
• Life-sustaining

Finally, its worth mentioning that a person could be the beneficiary of different trusts however, only one QDT is allowed, which needs to be elected by the trust and the beneficiary.

To summarize, a QDT is a very tax efficient tool to use for clients under the right circumstances. Although a QDT has certain requirements that need to be fulfilled, it should be considered when the circumstances require an additional layer of protection.

Written by Gustavo Paez Trujillo, Scotiatrust