Special Needs Planning
Presented and created by:
David Yurich, B.Comm., CFP, RFP, CLU
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
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
Special Needs
Planning
Goals
 What the disability and caregiver tax credit means to you
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and your family
Why creating a Henson 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
 Must be completed by parent and qualified
practitioner
 What constitutes the qualification for DTC ,
CGTC
DTC & CGTC…
“Why Bother?”
 Max DTC transferred from child (2010 tax year)
$7239
 Additional Supplement $4223 (Child under age
18-offset with child care expenses)
 Total possible Tax Credit $11,462
 Tax savings range $1,085 - $1,719 (real $$)
 Retroactive to date of diagnosis-can go back 10yrs
or more ($10,850 - $17,190)
Care Giver Tax Credit
 Children with Autism Spectrum
Disorder (ASD) & Children with
Aspergers Syndrome (AS) grow
up to be adults with ASD & AS
 Tax credit $4223 – Income
dependant
 In addition to DTC
“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 1991 or later
• List of “Eligible Expenses” in kit
*New for 2008*
• Specially trained animals & related expenses have been
extended to persons who are affected by Autism or
Epilepsy
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
Testamentary Trust Wills &
The Henson Trust
 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)
 Pay tax at graduated levels
Testamentary Trust Wills
& The Henson Trust
 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
Testamentary Trust Wills &
The Henson Trust
 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
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
 Trust receives deduction from income & gains
in a year for amounts paid to Beneficiaries in
that year
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 2009
First
Over
Over
Over
Over
Over
Over
Over
$36,848 $36,848 $40,726 $64,882 $73,698 $76,440 $81,452 $126,264
21.05%
$40,726 24.15%
$64,882 31.15%
$73.688 32.98%
$76,440 35.39%
$81,452 39.41%
$126,264 43.41%
46.41%
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
Taxation of Testamentary Trust
 Access to graduated rates, more beneficial to
retain income & gains and have Trust
pay tax versus Beneficiary
 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
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
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:
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
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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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is expected to last a year or more
makes it hard for you to care for yourself, take part in
community life or work
ODSP will look at:
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Financial situation ( assets, income, housing costs, size of
family)
Disability status
Ontario Disability Support Program
(ODSP) Rate Chart-November 2008
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
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
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
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)
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)
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
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
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 59yrs
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
RDSP…
Who can
become a
Beneficiary?
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?
 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
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
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
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
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
RDSP Limits
No annual limit
Lifetime limit of $200,000
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
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 $75,769
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)
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When annual net family income is over $75,769 the
grant will contribute $1 for every $1 contributed up to
$1,000
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 $21,287 or less the
government will provide $1,000 per year without any
contributions
Bond & grant must stay in plan for 10 years otherwise
must be repaid
Payments Made From
RDSP
 Payments to Beneficiary
Only certain
payments can be
made from an RDSP
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
New for 2011, Past Grants
 Eligible to claim past unclaimed grants for
preceeding 10 years (2008 inception date)
 To be eligible, must still qualify for DTC and
be appropriate age in each preceeding year
 Past grants paid to annual max $10500
 Unused past grants carryforward future
yrs
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 carryforward future
yrs
Thank You!
For more information/free consultation
705 522 1422/1 800 837 1670
Email: dave@soundfs.ca