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ODSP

Part 7 – A Deeper Dive into Henson Trusts and ODSP Considerations

In the realm of estate planning, it’s not uncommon for individuals to consider the financial well-being of their loved ones, including adult children who may rely on government assistance programs. One such program in Ontario is the Ontario Disability Support Program (ODSP), which provides support to individuals with disabilities. However, an issue often arises when an adult child collecting ODSP inherits an amount that can jeopardize their entitlement or reduce the support they receive.  In this blog, we will explore the complexities surrounding ODSP entitlement, income and asset thresholds, and the crucial role of the Henson Trust in safeguarding both the inheritance and the ODSP benefits of your loved one.   For a more general outline of a Henson Trust, visit our prior blog here.

Understanding ODSP Income and Asset Limits

ODSP offers financial support to individuals with disabilities, including income support and health-related benefits. However, to qualify for this program, applicants must meet specific income and asset thresholds. ODSP income limits generally allow recipients to earn up to $12,000 per year, while asset limits typically cap at $40,000 for a single person and $50,000 for a couple. In addition, ODSP recipients are entitled to gifts and inheritances of up to $10,000 a year without negatively effecting entitlement. It’s important to note that these figures can change over time, so consulting with a knowledgeable legal professional is essential for up-to-date information.

The Perils of an Inheritance

When an individual receiving ODSP inherits an amount that exceeds these limits, it can have significant consequences. Not only can their ODSP entitlement be jeopardized or reduced, but they may also find themselves grappling with a loss of crucial supports and services that contribute to their well-being. If the inheritance you plan to leave a beneficiary will set them up with abundant wealth, then this topic may not be a concern for you or them.  However, it is an all-too-common occurrence where an ODSP recipient receives an inheritance that, while jeopardizing their ODSP entitlement, is not sufficient to support them long term. 

Utilizing Exempt Assets

One effective strategy for safeguarding your loved one’s ODSP entitlement when they are inheriting assets is to ensure that the inheritance falls under exempt assets. Exempt assets are those that do not count towards the ODSP asset limit, allowing the recipient to maintain their benefits. Examples of such exempt assets may include a primary residence, a vehicle, certain disability-related supports, and trusts of less than $100,000. Through careful planning, it’s possible to structure the inheritance in a way that preserves these exemptions.

Moreover, even if proper planning was not conducted before receiving the inheritance, there are strategies available to protect you as an ODSP recipient. For instance, promptly placing the inheritance into certain exempt assets within the month the inheritance was received can prevent it from being calculated as an asset or income. This approach ensures that your ODSP benefits remain unaffected by the inheritance, providing you with continued essential support.

The Role of the Henson Trust

One effective tool to navigate the complexities of ODSP and an inheritance is the creation of a discretionary trust, often referred to as Henson Trust. A Henson Trust is a unique legal structure that enables you to allocate funds for the benefit of an individual with a disability while protecting their ODSP entitlement.

The Henson Trust is structured in a way that gives a trustee absolute discretion over the disbursement of funds for the beneficiary’s needs. Importantly, the beneficiary has no legal right to demand payments from the trust, and the assets within the trust are therefore not considered the beneficiary’s assets for ODSP calculation purposes.

Timing Is Key

Crucially, the establishment of a Henson Trust must be incorporated into your will while you are still alive. As previously discussed, after your passing, there are limited means to safeguard the entitlement of an ODSP recipient. However, it is important to understand that once you pass away, it becomes too late to implement the protective measures offered by the Henson Trust. Therefore, it is imperative to ensure that the trust’s terms are thoughtfully drafted to align with your intentions and cater to the specific needs of the ODSP recipient.

Takeaways

Navigating the complexities of ODSP entitlement, an inheritance, and the preservation of critical benefits requires careful planning and legal expertise. A Henson Trust is a powerful tool that allows you to provide for your loved ones with disabilities without jeopardizing their essential ODSP support. Seeking the guidance of an experienced estate lawyer is essential to ensure that your estate plan aligns with your goals and safeguards the financial well-being of your beneficiaries. Don’t wait until it’s too late; take proactive steps to protect your loved one’s future today.