In Canada adults with a disability who are unable to work because of a disability are entitled to receive financial assistance from their provincial government. The maximum monthly benefit an individual living away from the family home is entitled to receive, is well below the national poverty line. In addition people with a disability in receipt of social benefits may not have liquid assets in excess of $2,500 or up to $5,000 depending on their provincial regulations. Any income is clawed back and assets in excess their governments asset limit will result in a loss of their disability benefits until they are spent down to the asset limit.
Individuals who receive disability benefits live a precarious existence. Many spend 60% or more of their monthly benefit cheque on rental accommodation alone and they are forced to use the food bank to supplement their daily diet. With paying rent, transportation, telephone and cable TV there is little left over for food, clothes, household items and bedding. Living on a disability benefit is not the lap of luxury, it’s barely an existence and still they get by. A future like this is not the kind of future parents would want for their child with a disability.
Well what can you do about it? You can wait and watch what happens, you can sit and wonder what will happen, or you can make things happen, it’s up to you.
Proper planning for the future financial security of your child with a disability is essential. At the same time there is a concern that any planning should not jeopardize their government disability benefits. Under these circumstances parents must make proper plans in the event of their death for several reasons:
* There must be adequate plans to protect their estate assets from being used to pay for services provided by the province.
* There must be full consideration for the future lifestyle of their child with a disability.
* There must be full consideration for their child’s brothers and sisters or their inheritance may be subsequently affected by the needs of their sibling with a disability.
Most parents believe in treating all their children equally, but this may not be the case for a child who is receiving government disability benefits. Many government programs will be reduced or discontinued if the child has assets in excess of the minimum asset limit. Parents are faced with the dilemma of maintaining government benefits while respecting the legislation and treating all their children equally. There are alternatives that can provide some security while protecting their child’s entitlement to disability benefits and other government services.
An Absolute Discretionary trust. In an absolute discretionary trust the assets and the income are not considered a liquid asset of the trust beneficiary. The funds in the trust will be spent for the benefit of the trust beneficiary at the absolute and unfettered discretion of the trustees. This protects the property in the trust from government benefits, because the beneficiary of the trust is deemed to not own the assets. On the death of the beneficiary any assets remaining in the trust can be distributed to the beneficiary’s siblings or their grandchildren or donated to a charity as a future gift.
A Living Legacy Another alternative is the use of a Life TRUST life insurance policy. This plan will pay a lifetime income into an Absolute Discretionary trust for a child with a disability without incurring estate costs and probate fees or reducing the inheritance of the child’s brothers and sister’s. The attraction of this type of plan is that the family can provide a lifetime income for their child without affecting the inheritance of their child’s brothers and sisters. For one parent families or families with limited estate assets this is an affordable alternative that will provide their child with an enhanced lifestyle after they’ve gone.
If people with a disability are to have the financial means to command a lifestyle above the poverty line its essential that families prepare a comprehensive plan for their child with a disability.
Will your child have the resources to purchase recreational equipment, tickets to the theatre and cultural events, new clothes, vacations, pizza nights with friends and the plans to make that happen? Or will your child eke out a living on government benefits? it’s up to you. You can make it happen.
John Dowson Executive Director Life Trust Planning. www.life-trust.com