Special Needs Planning
Presented and created by:
David Yurich, B.Comm., CFP®, RFP, CLU., TEP
Director Private Client Group, Senior Investment Advisor
Special Needs Planning
 Provide for our communities', sons & daughters
with a disability → ”Quality of Life” they are
entitled to it now and when we are gone
 Protect their entitlement to Ontario Disability
Support Program & other Government Programs
 Must be certain that the planning that is done,
does not infringe on government regulation (s)
 Ensure children cannot outlive the benefits they
derive from our planning
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Special Needs Planning
 As parents, want guarantees in place to ensure
intentions are met after we are gone
 Fairness to Siblings:
 Common theme not to burden non disabled
children with responsibility of caring for disabled
sibling
 Parents realize these children either lead or will
lead their own lives
 Ensure plans are simple & effortless
 Proper balance between needs of All children
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Special Needs Planning
Goals
 What the disability and caregiver tax credit means to you and your
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family
Why creating a Henson Trust, a Disability Expense Trust, via a
Testamentary Trust Will is so important to you and your family
How we can use the tax savings to offset the creation of these
trusts
How we can use the tax savings to offset the long term funding
costs these trusts
Explore the reality and importance of long term financial and
estate planning
Review the current benefits offered through the Ontario Disability
Support Program Benefits
Explore the newly created Registered Disability Savings Plans
with a focus on the available Canada Disability Savings Grant and
the Canada Disability Savings Bonds
Disability (DTC) & Care
Giver Tax Credit
(CGTC)
 Copy of DTC in package
– Package contains: Federal DTC Certificate and a list of
current Qualified Medical Expenses Tax Credit items
 Must be completed by parent and qualified
practitioner
 What constitutes the qualification for DTC ,
CGTC
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DTC & CGTC…
“Why Bother?”
 Max DTC transferred from child (2014 tax year)
$7,766.00
 Additional Supplement $4530 (Child under age
18-offset with child care expenses)
 Total possible Tax Credit $12296
 Tax savings range $1,165 - $1,844 (real $$)
 Retroactive to date of diagnosis - can go back
10yrs or more ($11650 - $18440)
Source: 2014 Federal Schedule 1 (T1 General)
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Care Giver Tax Credit
& Family Caregiver Amount
 Children with disabilities possibly
grow up to be adults with
disabilities
 Tax credit $4530 ($6588 if eligible
for the Family Caregiver Amount)
– Income dependent
 In addition to DTC
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“Medical Expense”
• Don’t qualify for DTC or CGTC, then claim all associated
medical expenses
• Claim medical expenses for yourself, spouse or common
law spouse partner & children born 1997 or later
• List of “Eligible Expenses” in kit
Source: 2014 T1 General Income Tax Guide
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Will Kits… Not the answer for families
of people with disabilities
 Kits advertised on Radio @ very low cost
 Advertisements suggest replacing a competent
lawyer to complete Wills by filing out blanks on a
questionnaire
 Concern → Don’t ask the right questions regarding
special needs
 We encourage retaining professional legal advice
with individuals who specialize in this field
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Testamentary Trust Wills, Henson Trust,
& Disability Expense Trusts
 What is it
????
 Trust that arises on death through a Will
 Creates legal relationship between the Settlor, the
Trustee & the Beneficiary
 What makes Testamentary Trusts different from
other Trusts is the favorable tax treatment they
receive under Income Tax Act (ITA) (At this time, New
Rules pertaining to Graduated Rate Estates and Disability Expense Trusts,
effective January 2016))
 Pay tax at graduated levels for those who qualify for the Disability Tax
Credit
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Testamentary Trust Wills, The Henson
Trust & Disability Expense Trusts
 Terms of Trust can provide for payment of
income/capital or both to Beneficiaries
 Interest of Beneficiaries can be fixed in the Will
OR
 Discretion to allocate the income and/or capital
among the Beneficiary(ies) can be left to the
Trustee
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Testamentary Trust Wills, The Henson
Trust & Disability Expense Trusts
 Beneficiaries of Trust have interest in Trust
Property
 Trustee is legal owner of property
 Trustee has authority to control the management
of the assets
 Trustee has absolute power over the assets with
discretion to exercise power based on Settlors
wishes/intentions
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Taxation of Testamentary
Trust
 Trust treated as separate tax payer under ITA
 Trust files Income Tax Returns to report income,
gains & distributions to Beneficiaries each year
 Can have a non-calendar year (at this time)
 Trust receives deduction from income & gains in a
year for amounts paid to Beneficiaries in that year
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Taxation of Testamentary
Trust
 Living Trusts “Intervivos” pay tax @ highest
Marginal Tax Rate (MTR)
 Testamentary Trusts pay tax at a graduated level
 Ontario combined Federal/Provincial 2014
First
Over
Over
Over
Over
Over
Over
Over
Over
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$39000 $39000 $45000 $70000 $80000 $85000 $125000 $160000 $250000+
Source: http://en.planiguide.ca/tables/ontario/tax-table/
20.00%
$45000 31.20%
$70000 31.80%
$80000 36.70%
$85000 41.10%
$125000 43.40%
$160000 48.00%
$200000 48.90%
49.53%
Taxation of Testamentary
Trust
 Tax payable in province of residence of Trust
or where majority of Trustees reside
 Incomes maintains its character (interest,
dividends, capital gains) when paid out to
Beneficiaries
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Taxation of Testamentary
Trust
 Access to graduated rates, more beneficial to retain
income & gains and have Trust pay tax versus
Beneficiary (at this time, provided quality for
DTC)
 Trustee can elect to have income & gains taxed in
Trust even if paid or payable to Beneficiary
 Portfolio of Investments of $750,000 @ 8% per
year OR $60,000 in income saves $8,500 in taxes
each year
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Why consider a Testamentary
Trust?
 When a spouse has enough assets in his/her name to
permit other spouse assets to be held in trust to save
tax
 Children/grandchildren have enough assets who
want to save tax
 Protect assets widow/widower’s new suitor or
children spouse’s on marital breakdown
 Protect spendthrift or disabled child/children
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Ontario Disability Support Program
(ODSP)
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Operated by Ontario Ministry of Community & Social Services
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Designed to meet unique needs of people with disabilities who are in
financial need or who want & are able to work and need support
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ODSP provides income support to help pay for living expenses (like
food & housing)
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Benefits available:
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Drug/dental coverage, vision care, hearing aids, diabetic supplies
Help with transportation costs to medical appointments
Help with work related expenses, child care costs & items needed for work
If qualify → May also receive special diet allowance to offset costs of
casein, gluten, soy or sugar free diet
Ontario Disability Support Program
(ODSP)
To Qualify:
● 18 yrs of age or older-payable to 65 (if needed) then
CPP, OAS & GIS takes over
● Ontario resident
● In financial need
● Have substantial physical or mental disability that:
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ODSP will look at:
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is expected to last a year or more
makes it hard for you to care for yourself, take part in
community life or work
Financial situation ( assets, income, housing costs, size of
family)
Disability status
Ontario Disability Support Program
(ODSP) Rate Chart-November 2012
Basic Needs Table
Number of
dependants
other than a
spouse
0
1
2
Dependants Dependants 13 over 18 years
17 years
Dependants
0-12 years
Recipient (See
Note 1 below)
Recipient and
Spouse (See
Note 2 below)
Recipient and
Spouse (See
Note 3 below)
0
0
0
$596
$882
$1,189
0
0
1
739
882
1,189
0
1
0
757
900
1,207
1
0
0
951
1,063
1,370
0
0
2
739
882
1,189
0
1
1
757
900
1,207
0
2
0
775
918
1,225
1
0
1
951
1,063
1,370
1
1
0
969
1,081
1,388
2
0
0
1,133
1,264
1,571
For each additional dependant, add $202 if the dependant is 18 years of age or older, or $18 if the dependant
is 13-17 years of age, or $0 if the dependant is 0-12 years of age.
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Source:
http://www.mcss.gov.on.ca/en/mcss/programs/social/directives/directives/ODSPDirectives/i
ncome_support/6_1_ODSP_ISDirectives.aspx
ODSP & Inheritances…
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Family members if left an inheritance who are receiving
ODSP benefits will not be eligible for ODSP benefits
ODSP considers inheritance as a gift
Exemptions:
- up to $6,000 of total value of all gifts is exempt from
income (in any 12 month period without affecting ODSP
Income Support)
- $6,000 limit does not always count as income-when
used to pay for disability related items or services
- ODSP must approve item or service in advance to be
exempt
Source: http://www.mcss.gov.on.ca/en/mcss/programs/social/odsp/income_support/odsp_inherit.aspx
ODSP & Inheritances…
Example
 Inherit $ in August ODSP will consider it
when calculating income support for August
 If $ left over in next month- (Sept.) ODSP
will treat it as an asset in that month & asset
rules will apply that can affect eligibility for
income support
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ODSP & Inheritances…
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Inheritances up to $100,000 will not count as an
asset if it is placed in a Trust
Trust must be setup according to ODSP rules or
ODSP benefits could be affected
If inheritance more than $100,000 can still continue
benefits if placed within Discretionary Henson Trust
Setup through Will & gives Trustee power to decide
when to pay & how much money to pay Beneficiary
of the Trust
ODSP & Henson Trust
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History of Henson Trusts
Real solution to inequity is Henson Trust
Available in Ontario since 1989
Henson trust places estate assets in the care &
control of a trustee to be administered for the benefit
of a Beneficiary(s)
Inheritances placed in a properly prepared absolute
discretionary trust (Henson Trust) are not the asset
of the child & will not affect provincial benefits
“Discretionary Trust”, “Henson Trust” & “Absolute
Discretionary trust” often used interchangeably
Motivation for Parents & Guardians
to set up a Henson Trust
 Special beneficiaries often benefit from guidance
in handling large sums of money or significant
assets
 Either temporarily or on L.T. basis
 Some beneficiaries are unable or unwilling to
seek guidance
 May at some point be left without care unless
special provisions put in place
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Henson Trusts
 Must be created
during a parent’s or
guardian’s lifetime
(Intervivos)
and
 To the terms of a
parent’s or guardian’s
will (testamentary)
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These Trusts are invaluable in planning for child’s
care when Parent/Guardian no longer there
Benefits of Henson Trust
 No lifetime limit to the exempt amount of
assets that can be held in a Henson Trust
 In contrast- there is $100,000 lifetime limit
to a non Henson Trust, (any Trust where
the Trustee does not have absolute
discretion)
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The Bottom Line
Henson trusts, ODSP, Benefits &
Tax Credits are special
arrangements necessary to
properly ensure that Loved Ones
are given the extra care they
deserve & that inheritances will
not be wasted
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Options for Funding of Henson
Trust
 Savings: The establishment of a regular savings program may be able to
provide adequate funds to Henson Trust
 Parent’s Estate: Provided that the parent’s estate is sufficiently large, it
could provide for their own needs in their elder years, as well as having
enough left over to fund the trust
 Family members: siblings, aunts and uncle’s, grandparents could be
willing and able to provide money to fund the trust
 Life insurance: For the average family, life insurance may be the only way
that they can leave a large sum to the trust by making small monthly
payments. It is also possibly the only way of funding a trust that is
guaranteed. The other resources mentioned above may not always be
available but a paid-up life insurance policy can guarantee future funds
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Registered Disability
Savings Plan (RDSP)
 Savings plan intended to help parents &
others save for long term financial security
of person who is eligible for DTC
 Contributions non tax deductible
 Made until end of the year that Beneficiary
turns 59 years
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RDSP…
 Withdrawals of contributions are not
included as income for the Beneficiary
 However, Canada Disability Savings Grant,
Canada Disability Savings Bond &
investment income earned in the plan are
included in Beneficiary’s income for tax
purposes when paid out of RDSP
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RDSP…
Who can
become a
Beneficiary?
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One must be:
 Eligible for Disability
amount
 Valid SIN
 Resident of Canada @
time plan is entered
into
 Under age 60
RDSP…
Who can
set up an
RDSP?
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 Legal parent of Beneficiary
 Guardian, tutor or curator of the
Beneficiary
 Individual who is legally
authorized to act on behalf of
Beneficiary
 Public department, agency,
institution that is legally authorized
to act on behalf of Beneficiary
RDSP…
 When plan is opened by a Beneficiary’s
legal parent’s, the legal parents may
continue as holder(s) of the plan after
Beneficiary reaches age of majority
 When Beneficiary becomes an adult, he/she
may be added as joint holder
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RDSP…
 In all other cases, the Beneficiary is the only one
who can be a plan holder once they have reached
age of majority & are contractually competent
 If a plan is opened by somebody other than the
Beneficiary, or Beneficiary’s legal parents, that
person or body must be removed as a holder of the
plan when Beneficiary reaches age of majority
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RDSP…
 An individual who is eligible to be
Beneficiary of an RDSP, may have reached
age of majority but may not be competent to
enter into a contract
 If so: qualified person may open RDSP for
individual and become holder
Qualified Person are: -guardian, tutor, curator of Beneficiary, or person legally authorized to
act for Beneficiary
-public department, agency, institution that is legally authorized to act for beneficiary
Tutor or Curator: legally appointed individual either by will or by POA
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RDSP…
Holder who is not Beneficiary of plan does
not have to be resident of Canada but must
have valid SIN or BIN (business
identification number) in order to establish
plan
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How Do You Establish an
RDSP?
 Person who is qualified to be a holder of the plan
must contact a participating financial institution
that offers RDSP’s (can invest in GIC’s, mutual
funds, savings deposits etc.)
 Note: Beneficiary can have only one RDSP at
any given time, although this plan may have
several plan holders throughout it’s existence
 Plan holder is the person who establishes the
RDSP & makes contributions on behalf of the
Beneficiary
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RDSP Limits
No annual limit
Lifetime limit of $200,000
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Canada Disability Savings
Grants
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Government will pay matching grants of 300%,
200% or 100%, depending on family income &
amount contributed
RDSP can receive maximum of $3,500 in
matching grants, in a year
Maximum grant of $70,000 in Beneficiary’s lifetime
Source: http://www.clwindsor.org/resources/financial-matters/rdsp
Canada Disability Savings
Grants
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Grant can be paid to an RDSP on contributions made to
Beneficiary’s RDSP by Dec 31st of yr Beneficiary turns
49 yrs old
When annual net family income is less than $87123 the
grant will contribute:
- $3 for every $1 contributed on first $500
- $2 for every $1 contributed on next $1,000
(a $1,500 deposit will attract maximum grant of $3,500)
When annual net family income is over $87123 the
grant will contribute $1 for every $1 contributed up to
$1,000
Source: http://www.esdc.gc.ca/eng/disability/savings/grants_bonds.shtml
Canada Disability Savings Bond
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Government will pay income tested bonds of up to $1,000 a
year to low income Canadians with disabilities regardless of
amount contributed
Lifetime bond limit is $20,000
Bond can be paid to RDSP until year in which Beneficiary
turns 49
When annual net family income is $25356 or less the
government will provide $1,000 per year without any
contributions, between $25356 and $43561, bond is prorated,
over $42707, no bond is paid
Bond & grant must stay in plan for 10 years otherwise must be
repaid
Source:http://www.esdc.gc.ca/eng/disability/savings/grants_bonds.shtml
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Payments Made From RDSP
 Payments to Beneficiary
Only certain
payments can
be made from
an RDSP
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referred to as Lifetime
Disability Assistance
Payments (LDAP), or
Disability Assistance
Payments (DAP)
 Payments to Beneficiary’s
estate follow death of
Beneficiary
 Repayment of grants &
bonds to the government
Lifetime Disability Assistance
Payments (LDAP)
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Once started
must be paid at
least annually
until either the
plan is terminated
or Beneficiary has
died
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Begin by end of
year in which
Beneficiary turns
60
Subject to annual
maximum
withdrawals limit
based on
Beneficiaries' life
expectancy & fair
market value of
plan
Disability Assistance
Payments (DAP)
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Beneficiary can request
withdrawal from RDSP
between ages 27-59 years
DAP is considered
“financial hardship”
payment
Maximum withdrawal based
on formula
Then
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Beneficiary of
plan will be
entitled to request
& receive DAP
from the plan
RDSP Payments & Income Tax
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CDS grant, bond & investment income are
included in Beneficiary Income for tax
purposes when paid out of the RDSP
RDSP issuers report the taxable portion of
the payments from the plan in box 78 of T4A
slip
RDSP-What happens when
impairment no longer exists?
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RDSP must close no later than the end of
calendar year following the first full calendar
year that the Beneficiary is no longer
considered mentally or physically impaired
Grant, Bond and Investment earnings are
taxable, contributions are tax free
Similar tax treatment occurs at death
RDSP & Provincial Disability
Benefits
BC, Alberta, Saskatchewan, Manitoba,
Ontario, Newfoundland, Labrador & Yukon
have all exempted the RDSP as an asset &
income when determining a person’s
eligibility for Provincial Disability Benefits
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New for 2011, Past Grants
 Eligible to claim past unclaimed grants for
preceding 10 years (2008 inception date)
 To be eligible, must still qualify for DTC and be
appropriate age in each preceding year
 Past grants paid to annual max $10500
 Unused past grants carry forward future years
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New 2011 Past Bonds
 Eligible to claim past unclaimed bonds for
preceding 10 years (2008 inception date)
 To be eligible, must still qualify for DTC and
be appropriate age in each preceding year
 Depends on contribution amount,
beneficiary/family net income
 Past bonds paid to annual max $11000
 Unused past bonds carry forward future years
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Thank You!
For more information / free consultation
705.522.1422 /1.800.837.1670
Email: david.yurich@holliswealth.com
This presentation was prepared solely by David Yurich who is a registered representative of HollisWealth™ (a division of Scotia
Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of
Canada). The views and opinions, including any recommendations, expressed in this presentation are those of David Yurich
alone and not those of HollisWealth. ™ Trademark of The Bank of Nova Scotia, used under license.
HollisWealth and the Scotiabank companies do not provide income tax preparation services nor do they supervise or review
other persons who may provide such services.