Roadblocks Removed: Financial Planning for Seniors & Disabled Canadians

Financial planning for critical long-term care and disability has been a complex process for advisors in Canada. But a recent Supreme Court of Canada (SCC) decision regarding whether the absolute discretionary trust (Henson trust), which is designed to protect a disabled person’s assets, brings national clarity to the issue of whether or not this estate-planning tool can impact a disabled person’s eligibility for other benefits and credits.

On January 25, the Supreme Court of Canada ruled that an inheritance or funds left in a Henson trust should not be considered assets of the disabled person; at least, not as far as their eligibility for other benefits and tax credits are concerned. In this particular case, S.A. vs Metro Vancouver Housing Corporation, the beneficiary was denied access to an affordable rental housing subsidy as the “assets” in the Henson trust made her ineligible. However, the SCC overruled that decision, and for the first time provided clarity on a national level – “assets” in Henson trusts should not impact a disabled person’s access to provincial benefits and credits.

This year, the federal government, through budget 2019, also aimed to improve income sources for those with a current or previous disability. It proposed to eliminate the requirement to close a Registered Disability Savings Plan (RDSP) and repay grants and bonds within the year following loss of eligibility for the Disability Tax Credit (DTC).

As we reported back in April, for 2021 and subsequent taxation years, the budget specifically proposed to remove the existing time limitation on the period that an RDSP may remain open after its beneficiary becomes DTC-ineligible. Budget 2019 also proposed to eliminate the requirement for a licensed medical doctor or nurse practitioner to certify in writing that the beneficiary is likely to become DTC-eligible in future in order for the plan to remain open. A transitional rule will ensure that an RDSP issuer will not be required to terminate an RDSP after March 18, 2019 and before 2021 solely because the RDSP beneficiary became DTC-ineligible.

The SCC decision, and this budget proposal, if passed, could play an important role in financial planning with disabled Canadians, seniors, and their families, when advisors assess how to best invest and protect assets that could provide future streams of income.

Additional educational resources:  Join us at Knowledge Bureau Education Days: CE Summit Workshops to learn more about long-term care and continuity planning from special guest Karen Henderson. You’ll also learn about 2019 tax issues from keynote speaker Evelyn Jacks; get a primer on cross-border taxation from Dr. Dean Smith; and learn about smart banking for business from special guest sponsor CIBC. Early-bird registration ends today – so be sure to register now to save on tuition! Another great resource is Knowledge Bureau’s Planning with Trusts certificate course.

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