Planning for disabled family members

A number of client families have a member who is considered disabled for either tax or benefit purposes.  The purpose of this article is to review a few of the relevant disability planning issues.

1. Age and capacity – For a person who is under the age of 18 the parent normally makes all the large decisions, but once reaching the age of 18 a disabled person may have the capacity to handle his own affairs.  This depends on whether the disability is physical or intellectual.  In either case, parents usually want their child to be as involved and independent as possible, so they may actively help educate the child before age 18 and continue to support him from that time throughout life.  As the family financial advisor, I will help in this process and try to give the disabled person as much financial knowledge and independence as possible.   Once the child is of legal age, it is important that he assign a power of attorney for health care and for property, usually to his parents, in case he becomes unable to handle his decisions.

2. Eligibility for the disability tax credit certificate – This is a certification by the Federal government that an individual has a severe and prolonged disability that affects his ability to function in daily life.  The individual’s doctor will complete and sign the application form, which is then reviewed by a government employee.  If approved, it can mean several things.  First, it entitles the individual or a supporting family member to claim the disability tax credit and save some tax each year.  Second, if the individual is an adult with no income, it can mean eligibility for a provincial disability support benefit, which in Ontario is about $1,000 per month.  Third, it means the individual is eligible to open a RDSP – a Registered Disability Savings Plan – and receive grants into the plan which may be up to three times what is contributed to the plan.

3. Estate planning using a Henson trust – The parents of a disabled child will often wish to make special provisions for their child through their will.  If a child simply inherits money, he may then be disqualified from provincial benefits until the money is all spent.  A Henson trust is a trust created by a will that makes it clear that the disabled child is a beneficiary who has no right to demand money from the trust, although the trust is to be used for the care of the child.  This type of trust may be of unlimited size and provide unlimited care for a child.  The wording of a Henson trust must be done very carefully and I refer clients to a lawyer who specializes in this type of work and then stay fully involved in the process so I can better advise the family over the long term and help educate them about related issues.

4. Letter of wishes – This is not in the will, but rather is a letter written by you in addition to your will, to make clear your intentions about the execution of the will.  While it is not legally binding, a letter of wishes can provide great detail to your executor and beneficiaries about what you have in mind.  You may express wishes about how to handle certain assets such as personal items or a cottage, how to provide care for your disabled child, the types of things you have in mind for spending money for the child’s benefit, or anything else.  A well crafted letter of wishes can be an invaluable helper for an executor who may be left with a large and very long term responsibility.

If you know a family with a disabled member and that family has not yet partnered with an experienced financial advisor to make comprehensive financial and estate plans, I would be happy to meet with them and discuss how they may be able to improve their situation.  It is surprising how much can be done in some cases, if only the family knows what is available and how best to access it.  A caring financial advisor can make a huge difference in these cases.