"Cherish your visions and your dreams as they are the children of your soul, the blueprints of your ultimate achievements."
~ Napoleon Hill

Thursday, July 8, 2010

Future Planning for your Child with Disabilities - Part II

Having examined the issue of guardianship, we will now turn to financial planning for our children with disabilities.

Life Insurance
I have written previously about the importance of life insurance when planning for the future of your child with a disability. Think of it as your first line of defence. Or, perhaps, offence.

The first issue here is the type of life insurance you hold. Hopefully you have purchased whole life insurance as opposed to term insurance as term insurance will expire within a set number of years (20, for example) and after that, assuming you're still alive, you will no longer have any coverage.

In my previous post on this topic, you will read about "T 100" insurance" and "T100 joint and last" insurance. But the main point is this - look at your life insurance as not just a vehicle to protect your family in the event of your untimely demise (okay, is there really such a thing as a timely demise?!) but also as a source of funds to be placed in trust (or some other vehicle) to provide some amount of financial security for your disabled child in the future.

So, assuming you have term life insurance (with or without another source of funds for your child's future security), what is the best way to deal with these funds?

Unfortunately, when we get down to the nitty gritty, I must direct you to a financial planner, this being out of my area of expertise and everyone's financial situation being different.

I can, however, lay out a few known options for you.

The Henson Trust
I have written a fair bit on the Henson Trust in the past, so if you're not familiar with of what we speak, I would suggest you read my posts here.

Unfortunately (thanks a lot, Google Pages), many, if not all, of the READ MORE links in those older posts no longer work. And, in all honesty, I have neither the time nor the inclination to attempt to rewrite those posts at the moment (come to think of it, I very much doubt that I even have my old notes that so many of those posts were based on). So we will just have to do the best we can.

Most people are familiar with your typical garden-variety discretionary trusts, the ones you often see in Wills if a minor child is to be a beneficiary of the estate. Such a Trust allows whomever has been appointed as Trustee to decide what types of investments to invest in and whether and when to distribute money to the beneficiaries. We call such Trusts "discretionary" because the Trustee exercises his (or her) discretion in distributing the trust funds.

Buy the problem with your typical garden-variety discretionary trust for our children with disabilities is created by a regulation passed pursuant to the Employment Support and Income Assistance Act which reads as follows:
58 Trust Money
Where a sum of money is set aside in trust for an applicant or recipient or a spouse or dependent of an applicant or a recipient by a court or a person other than the applicant or recipient, assistance shall not be granted for the applicant or recipient where it is feasible to obtain support for himself or herself or his or her spouse or dependent child from the sum set aside.

A discretionary trust is caught by sec. 58 of the Regulations (and will thus end your child's right to obtain social assistance or other benefits under the Services for Persons with Disabilities program until the trust fund has been depleted) because with a discretionary trust, the beneficiary still has the legal right to go to court and have the Trustee's exercise of discretion analyzed to ensure that it has been exercised reasonably. And if the court finds that the Trustee has acted unreasonably, it can compel him to pay benefits to the beneficiary.

The Henson Trust, however, is a creature of a different sort. As what is known as an "absolute discretionary trust" (meaning that the Trustee cannot be compelled or forced to disburse money for the support of the beneficiary), your child, as the beneficiary of such a trust, will have absolutely no legal right to go to court and force the Trustee to provide any money to her. And, thus, it can no longer be said that it is "feasible" for the beneficiary of the trust to "obtain support for himself or herself".

Despite protestations from the Department of Community Services otherwise, the Henson Trust will should work to protect the beneficiary's access to government benefits in Nova Scotia. I say "should" because the issue has yet to be tested in court in Nova Scotia but the consensus of legal opinion is quite confident that, were it to be taken to court, the Henson Trust would not be caught by sec. 58. And this is a very good thing as it provides a vehicle to distribute those life insurance proceeds (along with any other assets) to your child without affecting their right to government benefits.

The one rather large "catch" with the Henson Trust, however, is that since the Trustee has been granted "absolute and unfettered discretion" (just a portion of the magic wording necessary to create a valid Henson Trust), theoretically, the Trustee could decide to never disburse any money from the trust to your child and there would be nothing that anyone could do about it.

For this reason, you will want to choose your Trustee with great care. You are giving them am immense amount of power over your child's life.

But all is not lost even if there is no one in your circle of family and friends whom you trust (or is willing) to take on this responsibility. A trust company can always be appointed as the Trustee. There are, of course, pros and cons to proceeding this way.

On the plus side, appointing a trust company may ensure experience, expertise, impartiality, understanding, permanence and availability. But on the other hand, trust companies don't work for free and their fees will, most likely, end up being paid out of the Trust itself. Also a trust company will, obviously, not know and understand your child and their needs the way a family member or close friend would.

But. If there are no other options, there are no other options. And, although I would strongly recommend you discuss your own personal financial situation with a financial planner, given the improved quality of life a Henson Trust can give your child over their lifetime, I would think it would be more than worthwhile to proceed with a trust company than to give up on the Henson Trust option completely.

For more information on the Henson Trust, I would highly recommend the following articles:

    (Authored by Paul C. Strickland and Michelle Moro of Siskinds LLP)
    Wills, Powers of Attorneys, the Henson Trust, Guardianship and what you need to think about before you visit a lawyer in regard to these topics, this article also covers in some detail the issue of picking the trustees for a Henson Trust.

  2. The Henson Trust Handbook
    One thing to be aware of when reading the Handbook is that there is a definite slant towards the Ontario system and the rules under the ODSP system as to
    allowable assets are different than those in Nova Scotia.

Sunday, July 4, 2010

Future Planning for Your Child with Disabilities - Part I

When one starts seriously considering the options available for parents who don't have anyone to succeed them in caring for their child with a disability, it qiuckly becomes obvious that we are talking about some very big shoes to fill.

And since future planning (whether or not you have anyone to succeed you) can cover a range of topics, from guardianship to life insurance, Henson Wills and RDSPs, I have decided to break the subject up into a series of posts.

In this first post, we will look at issues of future planning surrounding the guardianship of an adult child with a disability.

The issue of future planning around the guardianship of an adult child is not one faced solely by the parent who has no one else to succeed them in caring for their child. In fact, if there truly was not one individual available who was willing to act as a successor to a parent, the guardianship issue really becomes moot. The chips will indeed fall where they may. But because the above request was what got me thinking around this issue, I have decided to include this discussion here.

If you have (or plan to) obtain guardianship of your disabled child, you might want to consider what will happen in that regard following your death.

Although, generally speaking, a guardianship will be terminated when the guardian dies, there are certain exceptions to consider:

  1. If co-guardians have been appointed, the guardianship will continue under the surviving guardian.
  2. If the court has appointed an "alternate" guardian, the alternate automatically takes over when the guardian dies and guardianship continues.
This leaves a parent with two possible alternatives in regards to long-term planning and guardianship; namely, to apply either with a co-guardian or an alternate guardian.*

Although co-guardians are often spouses, an older sibling might make a good alternate guardian, provided they are of the age of majority at the time of the original guardianship application. Proceeding in such a manner would give the older sibling additional time to mature while the parent acts as guardian but would then allow the sibling to step in at a later date when the parent dies.

Of course, an alternate guardian need not be a sibling of the incompetent person and a co-guardian need not be a spouse; either could, theoretically, be any other individual with some relationship to the incompetent adult.

If neither a co-guardian or alternate guardian has been appointed, the guardianship will terminate when the guardian dies, leaving the incompetent person without a guardian. And contrary to what some might think, no government agency will automatically step in to fill this void.

Unlike Nova Scotia, the guardianship legislation in Saskatchewan allows a guardian to nominate a successor in their Will and when the guardian dies, the nominee will assume the role of guardian without further court order. Provision is made that the nominee must immediately notify the Public Trustee of the guardian's passing and then apply to court within 6 months for confirmation of their appointment as guardian.

That approach is much preferable to the situation here in Nova Scotia where the legislation does not provide any way for the guardianship of an adult to automatically continue following the death of the guardian. The only available solution would be for another individual to essentially start from scratch and apply to the court to be appointed as guardian just as the parent had.

However, if a parent with guardianship of their adult child was trying to plan ahead for their child's care after their passing, I might just make make the following suggestion. Please understand that I have no solid legal basis for what I am about to propose but I simply can't see any downside to proceeding this way and there's always a possibility it might just be beneficial.

The first thing I would suggest is that the parent find another individual who they feel would make a good guardian to their child in the event of their passing. Approach this individual and obtain their consent and commitment to apply to the court for guardianship of the adult child should the parent pass away.

Then (and this is the part of my proposal that has no support from the Incompetent Persons Act or anywhere else) I would suggest that the guardian include a clause in their Will setting out that on such and such a date they were appointed as guardian of their son or daughter and then identifying the other individual whom, upon their passing, they would wish to have appointed as guardian in their place. Such a clause would also include, in some detail perhaps, why, in their opinion, this named person would make a good guardian for their child.

Now, as I said, in Nova Scotia, there is no legal authority for the guardian of an adult to appoint another guardian in their Will, unlike the situation where a parent can appoint a guardian for their minor child after their passing. And, of course, even in the situation of the minor child, the court would always have the power to over-ride the parent's wishes and appoint another individual as guardian should someone contest the parent's nomination.

But I still can't see any downside to the guardian of the adult including such a provision in their Will, which the person whom they so named could then attach as an exhibit to their affidavit when they apply for guardianship. The named individual would still be required to go through the process of applying for guardianship, just as the initial guardian had, but, although the court is is no way bound to follow the wishes of the previous guardian, it might just be one more factor to tip the scale in favour of the court appointing this other individual as the new guardian. And, if nothing else, you can at least rest a little easier knowing that someone you trust has agreed to apply to be appointed as guardian of your adult child.

Just remember, though, that were a person to go to their lawyer with instructions that their Will be changed to include such a clause, they would no doubt immediately be advised that they had no power to nominate a successor guardian. In which case, the person would respond that yes, they were aware of that fact but thought it might just be worth the extra effort of advising the court of their thoughts on who would make a suitable successor guardian for their child.

The idea being that if the parent/guardian shows that they have given some considerable thought as to whom might make a good guardian for their adult child, the court might just give at least a little weight to their opinion on the matter.