Tuesday, 1 April 2014

Estate Planning for Persons with Disabilities

Estate Planning for Persons with Disabilities

Discretionary Trusts and Registered Disability Savings Plans

By Courtney Aarbo Fuldauer LLP, Barristers & Solicitors

It is always a huge concern for parents of persons with disabilities to estate plan for when the parent dies.  How will a disabled son or daughter be looked after?  Two savings vehicles have traditionally been resorted to, the “Discretionary Trust” and the “Registered Disability Savings Plans”.

  1. Discretionary Trust

In Alberta, traditionally parents would set up a discretionary trust whereby a Trustee, often a brother or sister of the disabled child, would be appointed Trustee over a sum of money.  This Trustee would invest the fund and pay it out to cover the needs of the disabled child.  Often, any money left in the fund on the death of the disabled child would go back to the parents’ Will to then be distributed to other beneficiaries. 

Disabled adults in Alberta regularly receive support payments from the Alberta Government (usually under the “Aish” program).  In the past, the government would allow the disabled adult to continue to receive Aish benefits so long as the amount in the discretionary trust did not exceed $100,000.00.  The discretionary trust thus was a vehicle to purchase “extras” for the disabled adult, above the minimal amount received from Aish.

Unfortunately, government officials have recently indicated that the policy of Aish benefits continuing even though there was a discretionary trust for the disabled adult not exceeding $100,000.00, is now no longer the policy.  In the future, the Aish benefits may well be cut off until the $100,000.00 fund is exhausted.

In our view, the discretionary trust vehicle should not be considered as a supplement amount on top of Aish benefits anymore.  It may well be however, that the discretionary trust estate planning vehicle is still useful to care for the disabled adult for other valid reasons.

  1. Registered Disability Savings Plan

The preferred vehicle for looking after a disabled adult, after his or her parents are gone, is probably the Registered Disability Savings Plan (“RDSP”).

Anyone can set up a RDSP for a disabled person.  It functions a lot like an RESP in that there is no tax deduction on contributions, but any interest, and as well various government grants to top up the fund are not taxable.

The maximum amount of contributions is $200,000.00.

A parent can contribute to the fund after death through his/her Will and can name the RDSP as a beneficiary up to $200,000.00 from RRSP/RIF accounts.  Money left through an RRSP/RIF from a parent can even be rolled over to the RDSP without the RRSP money being deemed cashed in and taxed.

 A parent can name a person to administer the RDSP in the case of a disabled adult beneficiary with a mental disability.

 Lastly, and possibly most importantly, Alberta government officials have indicated that an RDSP plan (up to $200,000.00) will not result in the disabled person being cut off from their Aish (government) benefits.  Obviously, this is quite different then the government policy on discretionary trusts.

If we at Courtney Aarbo Fuldauer LLP can assist further in the Will documentation required to plan for a disabled beneficiary, we would be pleased to do so.

For more information, please contact the law office of Courtney Aarbo Fuldauer LLP, Barristers & Solicitors at:

Address:              3rd Floor, 1131 Kensington Road NW, Calgary, AB, T2N 3P4

Phone:                (403) 571-5120

Email:                   info@courtneyaarbo.ca

Gary C. Courtney
Barrister & Solicitor

*The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal assistance, please contact a lawyer*

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