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Enhancing Quality of Life

Enhancing Quality of Life. for a Person with a Disability on ODSP Disability Benefits Sallie Hunt Northwest Community Legal Clinic 1-800-403-4757. Locating ODSP Policy Directives. To find ODSP Policy Directives – Go To:

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Enhancing Quality of Life

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  1. Enhancing Quality of Life for a Person with a Disability on ODSP Disability Benefits Sallie Hunt Northwest Community Legal Clinic 1-800-403-4757

  2. Locating ODSP Policy Directives To find ODSP Policy Directives – Go To: Ministry of Community and Social Services at http://www.mcss.gov.on.ca/mcss/english/index.htm • Click on Ontario Disability Support Program • Find Please Note – Click on ODSP policy directives • Click on Income Support Directives http://www.mcss.gov.on.ca/mcss/english/pillars/ social/directives/ODSP_incomesupport.htm

  3. TOPICS: Investments & Estate Planning • Exempt Assets & Investments for people receiving ODSP benefits • RESPs & RDSPs • Trusts • Leaving gifts in your Will through a Trust • Henson Trust – a special type of Trust

  4. Exempt Income/Assets on ODSP • $5,000 for a single person • Income was increased to $6,000 from gifts, voluntary payments, payments from trusts or life insurance policy, honorariums or windfalls • Owning a home or Principal Residence • Vehicle • 2nd vehicle if required for work • CCTB, NCBS, OCB, etc.

  5. Exempt Assets on ODSP • Payments from any source for disability-related items • Pre-paid funeral • Earnings & Assets of dependent children • Earnings & Assets of a dependent adult while attending school • Locked-in RRSPs and locked-in pensions

  6. Exempt Assets on ODSP • Trust fund from insurance proceeds or inheritance* • Life insurance policy* • Pain & suffering awards/settlements* • WSIB non-economic loss (NEL) awards* *To a Maximum of $100,000

  7. Investments Allowed onODSP RESPs* • Registered Education Savings Plans *Lifetime Limit of $50,000 • CESGs + CSBs RDSPs** • Registered Disability Savings Plans **No Maximum Limit

  8. RESPs – What is an RESP? RESP – Fed Gov’t incentive program for parents and family to save for a child's post-secondary education RESPS include: 1. Canada Education Savings Grant (CESG) • CESG* pays 20% (or more) of annual contributions made to an RESP – to a maximum of $500/child ($1,000/child if unused from previous year) * Lifetime Limit of $7,200 If funds are taken out of an RESP prematurely  must repay the Gov’t of Cda for the CESG (unless child/beneficiary is already attending a post-secondary institution)

  9. RESPs – include: 2. CLB – Canada Learning Bond CLB pays $500 first year and $100 per year* until child is 15 • If child qualifies – born after Dec. 31, 2003, & receives the National Child Benefit Supplement (NCBS) *To a Maximum of $2,000 • The first deposit of the CLB includes an extra $25 to cover the cost of opening an RESP • You do not have to contribute money to receive CLB payments – JUST OPEN an RESP

  10. RESPs – To Open an RESP • It costs $1.00 to open an RESP account for a child with a RESP provider (most financial institutions) • You will need a Social Insurance Number (SIN) for you and your child • If you do not have a SIN – Apply at your local Service Canada office or go online to www.servicedanada.gc.ca

  11. RESPs – To Open an RESP • You do not need a bank account to open an RESP • There are several types of RESPs – Family Plan, Individual Plan or Group Plans • There is no age limit for opening an RESP • An RESP can stay open for a maximum of 26 years (31 years for a person with a disability)

  12. RESPs – Contributions • You will not be taxed on the amount you contribute to your RESP • Interest paid on any money borrowed to contribute to an RESP cannot be deducted • You do have to pay taxes on the money you earn in the RESP plan as interest For more info on RESPs go to: http://www.cra-arc.gc.ca/E/pub/tg/ rc4092/rc4092-e.html#P52_7449

  13. RESPs – Registered Education Savings Plans for those on ODSP • Any member of the family benefit unit can have an RESP  Exempt Asset • Any money or gifts paid into an RESP  Exempt Asset • Fed Gov’t matching payments - CESG or CSB into RESP Exempt Asset • Beneficiary of RESP can be changed from one child to another

  14. RESPs – Registered Education Savings Plans for those on ODSP • RESP funds used for Education Costs  Exempt • can be used for part- or full-time study • Some of the RESP funds can be used as an Educational Assistance Payment* to fund a Qualified Educational Program *To a Maximum of $5,000 Educations Costs: Tuition & other fees, books, instructional supplies & equipment, transportation, and disability-related expenses

  15. RESPs –Child does not continue Education after high school If your child does not continue education after high school : (1) Wait as your child may decide to study later (2) Transfer the money to a sibling’s RESP (3) Transfer money to an RRSP or (4) Consult with your RESP provider about withdrawing your savings

  16. RDSPs – What are Registered Disability Savings Plans? RDSP is a savings plan for parents and others to save for a person who is disabled and eligible for the Disability Tax Credit • Contributions to an RDSP are not tax deductible • Contributions can be made until the disabled/beneficiary turns 59 years of age For more info go to: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rdsp-reei/

  17. RDSPs – To Set Up an RDSP First - Qualify for federal Disability Tax Credit (DTC) • Complete Form T2201, Disability Tax Credit Certificate - http://www.cra-arc.gc.ca/E/pbg/tf/t2201/ • Take the form to a qualified health professional • Once completed send it to the Winnipeg Tax Centre • This can be sent at any time during the year

  18. RDSPs – Contributions Contributions • No annual limit • Contributions are limited to a lifetime amount of $200,000 RDSPs include contributions from: 1. Canada Disability Savings Grants (CDSG) 2. Canada Disability Savings Bonds (CDSB)

  19. CDSG + CDSB Contributions 1. Canada Disability Savings Grants (CDSG)* • Fed Gov’t will match annual contributions to a maximum of $3,500/year and to a lifetime CDSG limit of $70,000 2. Canada Disability Savings Bonds (CDSB)* • Bonds up to $1,000/year  provided for low- & modest-income families, to a lifetime limit of $20,000 • No requirement to contribute to RDSP to access CDSBs *Can be paid until the Beneficiary turns 49

  20. RDSPs -Withdrawal of Funds Contributions made to an RDSP are not included as income for the beneficiary when withdrawn But, the Grant (CDSG), Bond (CDSB) and any investment income earned  will be included in the beneficiary’s income for tax purposes when the money is withdrawn

  21. RDSPs – Registered Disability Savings Plans for those on ODSP • All funds in RDSPs  Exempt Asset • no matter who makes payments to RDSP • Canada Disability Savings Grants (CDSG) & Bonds (CDSB)  Exempt Asset • Income (interest) earned & reinvested in RDSPs  Exempt Asset • All withdrawals from RDSPs  Exempt Asset/Income for ODSP (but not for income tax)

  22. Trusts – What is a Trust? A Trust is a bank account in which a person (the Trustee) holds the account for the benefit of another person (the Beneficiary) Sometimes the Trustee and Beneficiary are the same person • The Trustee must use the money in the Trust for the benefit of the Beneficiary • Certain Trusts fit under ODSP Asset and Income Exemptions • Money from a Trust* created from proceeds of a life insurance policy  Exempt Asset *To a Maximum of $100,000

  23. Trusts – from an Inheritance • Money from a Trust* (Testamentary Trust) created through a Will  Exempt Asset • Inheritance money received by a Beneficiary directly and afterwards put into a Trust* (Shelter Trust) = Income in the month received and then is Exempt as an Asset *To a Maximum of $100,000

  24. Trusts – Henson Trust An Inheritance of more than $100,000  is NOT an Exempt Asset because it is over the ODSP maximum limit • This means a person on ODSP would be found ineligible for ODSP benefits UNLESS • A Henson Trust had been set up, and • The Henson Trust MUST have been established in the Will

  25. Trusts – Henson Trust A Henson Trust is also called a “Discretionary Trust” • because the beneficiary has • NO control, nor access to the Trust • NO say over when money is removed from the Trust nor how much • Payments and control of the Trust are at the Absolute Discretion of the Trustee

  26. Trusts – Henson Trust A Henson Trust established through a Will passes wealth on without jeopardizing a person’s eligibility or entitlement to ODSP benefits because of is discretionary nature • The Trustee administering the Trust must be aware of relevant ODSP legislation and policy directives • If the Trust allows, the Trustee can spend both the capital and income

  27. Trusts – Henson Trust • A Henson Trust MUST be drafted properly to be absolutely discretionary • The Trust should state what happens to the Trust should the beneficiary die • For this reason, the Trustee should not be a family member who could then inherit the Trust

  28. Henson Trust – Things to Think About The Trustee has a lot of power so consider: • Appointing more than one Trustee • How well the person knows the Beneficiary • Ability to manage Trust • Ability to understand terms of Will & Trust • Ability to understand ODSP Rules • Trustworthiness of the person The End

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