Estate Planning for Disabled Beneficiaries
In British Columbia, the provincial government provides disability assistance for eligible persons with disabilities who need help completing daily living activities. Individuals receiving disability related income support must meet certain strict criteria, including strict asset and income thresholds.
The current asset limits are set out here:
For example, currently in British Columbia, a single person receiving disability benefits can hold $100,000 in cash, equity in property, investments, or other financial instruments, or in trust where they have control over the disbursements.
Therefore, if a disabled beneficiary receiving disability benefits stands to receive an inheritance in an amount that will push their above-mentioned assets over $100,000, that inheritance can result in the loss of their provincial benefits. This means that care must be taken when leaving an inheritance to a person who is receiving disability benefits.
Rather than leaving inheritance funds to a disabled beneficiary outright, we generally recommend that the will maker establish a trust in their will that leaves the inheritance funds to be held in trust for the benefit of the disabled beneficiary. This has the added benefit of protecting a beneficiary who may find it difficult or impossible to handle their financial affairs themselves (although of course, that will not be the case with all people receiving disability benefits).
These types of trusts are commonly referred to as “Henson Trusts”, named after the case of Ontario (Ministry of Community & Social Services) v Henson. The trustee of the Henson Trust has complete discretion to distribute the income and capital from the trust to the beneficiary, as they see fit. Because the beneficiary cannot demand payment or force the trustee to give them money from the trust, they are not considered to own the trust funds, and therefore, their provincial disability benefits are not affected.
It should be noted that trusts for persons receiving disability benefits can be created either in a will, in which case the trust would take effect once the will maker has died, or, can be “inter vivos”, meaning the trust would take effect during the lifetime of the person who creates the trust.
Trusts such as this require careful consideration, but with the right planning you can ensure that a loved one receiving disability assistance does not lose their benefits by receiving an inheritance.
Author: Jane Otterstrom
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of wills and estates at the following:
Una Kuzio: firstname.lastname@example.org
Bennett Liddycoat: email@example.com