Part 4 of “Will Planning – no simple task” will raise the issue of planning for a disabled family member who receives government disability benefits.
I think it is fair to say that most people who have a disabled family member have twin goals. They want to ensure their family member is provided for in a manner that appropriately addresses their needs while also ensuring that any government benefits their family member receives are not put into jeopardy by any financial assistance provided on death. Unfortunately, unless appropriate planning is engaged in, those two goals will conflict.
This is because in Ontario entitlement to benefits under the Ontario Disability Support Program is based upon an applicant not having assets beyond a certain economic threshold. Once assets exceed the threshold, then he/she will not be eligible for benefits.
In the context of providing for a disabled family member on death by a gift in a Will, the receipt of the gift may result in the family member exceeding the threshold.
If this sounds like there is no means to achieve the twin goals, fear not. As there is a means available.
The solution is to direct that the amount to be given to the disabled family member be held in a fully discretionary trust of which he/she is a beneficiary. This type of trust is commonly referred to as a “Henson” trust after the decision in Ontario (Ministry of Community and Social Services) v Henson.
The important feature of a “Henson” trust is that the disabled family member not have a vested interest in any of the income or capital of the trust unless and until discretion is exercised in their favour.
Remember though, whether a trust makes sense will depend not just on meeting the twin goals but on other factors like: the size of the trust, the added costs of administering the trust, and having appropriate persons to manage the trust. This is a whole other topic, so stay tuned!
Corina S. Weigl