Estate Planning Considerations: Providing For Your Disabled Loved Ones

By Melodie Lind

Everyone should have an estate plan, including a Will. Your estate plan disposes of all of your worldly possessions and is your last means of providing for your loved ones. Having a good, well thought-out estate plan becomes even more important when one of your beneficiaries is living with a disability.

All estate plans should involve a consideration of where your assets should go, how best to facilitate the administration of your estate, and how best to minimize taxes and probate fees. Additional considerations arise when your estate plan includes a disabled beneficiary. Some of these considerations might include:

  • Can I leave money to the beneficiary, but have someone else look after managing the money?
  • Can I make sure the money I leave to the beneficiary is used to assist with disability-related needs and future expenses?
  • Can I leave the beneficiary assets other than money?
  • Can I make a gift to the beneficiary without jeopardizing any other disability benefits he or she is already receiving?

With the proper planning, it is possible to provide for a disabled beneficiary in a manner that ensures his or her future needs are met and that ensures he or she has the correct amount of oversight and assistance (if necessary), while maximizing other government-funded disability benefits.

One common method of providing for a disabled beneficiary involves the use of a trust. Put simply, a trust is created by giving some assets to one or more people (the “trustees”) to hold and manage on behalf of another person (the “beneficiary”). A trust can be created to take effect during your lifetime or can be created on your death through your Will.

A trust can be tailored to suit the specific circumstances of the disabled beneficiary. For instance, the disabled beneficiary can be named as one of the trustees to give him or her more control over the trust assets, if appropriate. The trust can be fully discretionary, which means that the trustees have complete control over when and how much money is given to the disabled beneficiary (commonly referred to as a “Henson Trust”), or it can specify when payments are to be made and/or restrict what the trust assets can be used for. The trust can also specify what happens in the event the beneficiary dies.

If prepared properly, and within the requirements of the legislation, such a trust can be in place while still allowing for the beneficiary to receive disability benefits. It also may protect the assets from creditors of the disabled beneficiary and from ill-intentioned people seeking to take advantage of the disabled beneficiary. In addition, if the trust is created on your death through your Will, the trust will have the benefit of favourable income tax rates.

Other ways to provide for a disabled beneficiary include gifting particular assets that will not disqualify him or her from receiving disability benefits, and contributing to a Registered Disability Savings Plan.

In conclusion, there are some excellent estate planning tools available where you have a beneficiary that is living with a disability. These tools may help you best provide for your loved one, and should be thoroughly considered when creating or reviewing your estate plan.

For more information on related matters, contact Melodie Lind who is part of our Tax Law Group at: lind@pushormitchell.com or (250) 869-1210