In what might be one of the last pipeline transactions my office will advise on (depending on the outcome of the Government of Canada tax proposals), I ran into an unfortunate situation which served to highlight a fundamental aspect of estate planning: Planning for your beneficiaries.
Recently, I reached out to the beneficiaries of the estate I am working on to determine their personal tax positions for this current year. This was to assist me with a recommendation to how best to tax the distributions. There was an opportunity to improve on the avoidance of double taxation (a fundamental piece of the pipeline transaction) that is, actually save taxes for the estate and the beneficiaries.
It was not to be. Much to my chagrin and that of counsel, we discovered that 2 of the beneficiaries were on disability, one of which was on the Ontario Disability Support Program (“ODSP”).
Now we have much larger issues such how do we deal with distributions made to date and those forthcoming.
My fellow blogger, Malcolm Burrows, provided an update at the beginning of August on the changes to OSDP which relaxes the restrictions somewhat for certain distributions affecting OSDP claims but highlights having a beneficiary on ODP (or any other disability plan) requires very careful planning to avoid losing access to the Plan altogether.
I am not entirely sure what the status of the beneficiaries was when the original will was drawn up but having beneficiaries on disability may not have been an issue at the time or regrettably, simply not planned for. What I do know for sure is the will had not been updated in 20+ years.
Making plans in your will for your assets and belongings is very important. Equally important is making those plans work for your designated beneficiaries. The status of your assets and belongings change and so do your plans. The same can be said for your beneficiaries!
So please keep your wills up-to-date and be mindful of the changes in status of your beneficiaries, health or otherwise.
Thanks for reading