Another Day, Another Link

You will recall that more than a few of my recent posts have dealt with material gleaned from Mr. Kenneth Pope when he visited Halifax for the Disability and Estate Planning Seminar.

Well, today I came across this article on Mr. Pope's website, The Proposed Registered Disability Savings Plan (RDSP) ~ Helping families do more with their money. I would suggest that you do check it out as the man does, indeed, 'know his stuff'.

In fact, you should really just take a mosey around his whole site.

The RDSP In A Nutshell

So. I wanted to do one more post on the Registered Disability Savings Plan (RDSP). From my notes from the Disability and Estate Planning Seminar.

The way I understand it, the RDSP has a lot in common with both the RRSP and RESP. Its much more like the RRSP than I first realized. In fact, it appears to be very much like a RRSP for a person with a disability.

Before I go any further, let me state that the following is based on information I received at the Seminar on October 13, 2007. So it may have become subject to change since that time.

That being said, here is what I understand:

1. I am not 100% clear on this and I'm not sure whether it has been definitively decided or not, but some at least are saying that no funds will be able to be withdrawn from the RDSP until the person reaches the age of 60 (or some other similar magic age).


2. One of the really nice things about the RDSP however is that (much like the RESP), the government will match contributions made to the Plan. As I understand it, the first $1,570 contributed to the Plan will trigger a $3,500 contribution from the federal government.


3. Depending on certain income guidelines, it could be possible that even in years where no contributions are made to the Plan, some amount of government contribution will still occur.


4. The lifetime maximum contribution to the Plan (by individuals, not including the government grants) is $200,000.


5. Subject to that lifetime maximum, contributions made to the plan until the disabled individual is 49 years of age will trigger government contributions.


6. Subject to that lifetime maximum, contributions can continue to be made to the Plan until the disabled individual reaches the age of 59, but no government contributions will be triggered once the disabled individual is 50 years of age and older.


7. If the disabled individual starts withdrawing money from the Plan within the first 12 years after the Plan is created, she will be required to start paying back some of the government contributions.

All that being said, I probably can't do much better than to point people back to Jack's blog. Off you go.

Update: I just went and checked out Jack's blog again myself. Most, but not all, of the above is accurate so you really do need to head over there to get the most up-to-date information.

Now, again, off you go.

**Once again, with grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'.

Do You Really Know Your Life Insurance?

Maybe you do. Hopefully you do.
Hopefully you've given it a little more thought than I had.

I purchased my first life insurance policy shortly after my marriage. Prior to that, I hadn't felt that I had any reason to really think about it. But knowing that I would want to start a family in the not too distant future made it seem like a good idea.

And I purchased term life insurance. After all the cost of whole life was significantly more. And with both my husband and I each having two different policies and being happy with the overall amount of insurance we had, I put the matter out of my mind. Crossed it off my mental list. After all, there are always enough other things to think about, right?

Unfortunately, I had failed to seriously consider the implications of term insurance. The implication being that when the term was up (20 years in my case), so was the insurance policy. The death benefit was gone, all was lost. Sure, there would be happy to sell me another term policy at that point. With the new premium being based on my age at that time.

Yeah, I know. Some of you out there must be saying "Duh. How could she miss that?". And honestly, I don't know. But I did. And I would have no doubt remained in my happy state of oblivion until the term expired (three years from now as it turns out) and I was slapped in the face by reality.

The only reason it came to my attention now was because of Mr. Pope's comments on life insurance at the Disability and Estate Planning Seminar. Mr. Pope was recommending the purchase of what's often called T100 insurance - term to 100 insurance. Apparently, not all companies continue to offer this type of insurance but it can still be found. In its simplest form, its term insurance that continues until the insured reaches the age of 100 years.

Mr. Pope also spoke about something called "T100 joint and last" in which the spouses jointly purchase one policy which covers both their lives. In this example, the insurance policy would not pay any death benefit when the first spouse died. However, the surviving spouse would no longer have to pay any more premiums after that death and the policy would pay out when the second spouse died. And the spouses would have set it up so that the proceeds would go into a Henson Trust when the second death occurred.

In this case, the policy is being used not as an insurance policy, but as a monthly savings plan. If you place your money in a savings account, you won't make anything. Unlike putting your money with an insurance company.

And as Mr. Pope was talking, it hit me. Other than our house, the only asset we will really have to leave to our children is our life insurance. Which I was aware of. Which is what I intended would go to them in trust.

Right, that would be the policy that would no longer exist once the term was up.

Which meant that I needed to ensure that at least some of our life insurance was converted to whole life or a T100 policy. In our case, since our family will need some of that life insurance to make up for the loss of income should one of us die, a 'T100 joint and last' policy would not be a practical alternative. Unfortunately, I am now looking at making that conversion to whole life with premiums based on my current age. As opposed to my age 20 years ago.

That repetitive noise you hear? That's me still kicking myself.

So as you consider what you will have to leave not just your disabled child but also any siblings they may have, it might not be such a bad idea to pull out those life insurance policies. And look at them again. Because even if you have term insurance and the term won't expire until your children are adults, chances are you will want to make sure that you still leave something to your disabled child, no matter how old they might be upon your death.

In which case, if you're counting on your life insurance proceeds to form part, or all, of a Henson Trust, you will want to make sure that you will actually have a valid policy that will pay out no matter what your age when you die. And the sooner you ensure you have that set up properly, the less you will have to kick yourself about.

Trust me, I know.

**Once again, with grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'.

Foundations in British Columbia

I am trying to get more information as to exactly what kind of help this family is looking for but on the off chance one of my readers can help, please either leave a comment or click on the Profile link and send me an email. Thank you.

Question too all. Are there any foundations in Canada that can help a family out whose child has a very rare from of epilepsy. The child is 14 months old and has Dravet's Syndrome.
Kelowna, BC, Canada

Introducing ... Exceptional Family

I've always been a big fan of the Exceptional Parent magazine. Its got lots of good info on almost every aspect of daily living when you have a child with a disability. Medical research, products available, legal info ... only problem is, its all American. And as is often the case, there never seems to be a Canadian equivalent.

So I was very pleased and surprised to come across the Exceptional Family magazine recently. Yes, Virginia, it is Canadian.

Apparently its a quarterly publication (published four times per year) and has been around for a couple of years.

In her first editorial published in the inaugural issue in the fall of 2005, Aviva set out her mandate as Editor:

As a public resource, Exceptional Family was born to unify the special needs community that often feels isolated, misunderstood and marginalized. As such, it will serve as both a reference and support network for exceptional families in search of validation of their unique emotions, challenges and experiences. In addition to the publication’s parent audience, EF will also serve as a resource for medical and mental-health professionals who wish to be on top of the latest research and developments within the exceptional population.

For his part, Warren who accepted to act as Publisher of the new magazine, describes the venture as “an exciting opportunity to reach out and connect not only with our clients and their families, but to the broader population of exceptional people and service providers.”

He vows to “break the silence and stigma surrounding disabilities…to serve as the communal voice of strength and inspiration.”

I've only read halfway through the Fall 2007 issue but so far I'm pleased. No, its not Exceptional Parent but it is Canadian!

Here are some excerpts from Fall 2007 Issue:
Going the distance

Sexuality in the schoolyard

Dentistry for Exceptional Families

Cracking the code

From The Editor: At the risk of sounding cliché

The RDSP Comes To Life

Pulled from the comments on The RDSP ... Boom or Bust? post:

Hi Michelle, Just thought that I would let you and your readers know that Bill C-28 was tabled in Ottawa on November 21st. Among other things, the Bill will create the RDSP. I've got a bit more information at my blog: http://rdsp.wordpress.com/
Cheers, Jack

That's Jack Styan, Executive Director Planned Lifetime Advocacy Network (PLAN). As I've said before, check them out.

Can I Really Do That - The Henson Trust in Nova Scotia

We've been discusssing the Henson Trust over the last couple. Today a look at another practical issue around the use of a Henson Trust.

Validity of the Henson Trust in Nova Scotia

Apparently the Department of Community Services (DCS) takes the view that Henson Trusts are not valid in Nova Scotia. In other words, go ahead and set one up if you want, but you are wasting your time and money. Because we will take the view that your child has access to assets and thus they will be ineligible for benefits.

Here is the 'scoop' on that, according to Mr. Pope. And remember this when you go to a lawyer to create a Henson Trust, either in the context of your Will or otherwise (which we will discuss later).

Discretionary trusts will not protect your child's access to government benefits.

A discretionary trust is a type of trust where the Trustee is given discretion as to what types of investments to invest in and as to whether and when to distribute money to the beneficiaries. This type of trust is fairly common in a Will where one of the beneficiaries is a minor. Even though with this type of trust, the Trustee has the discretion to decide whether or not to distribute money to the beneficiary, this won't be sufficient for our purposes. Because with a discretionary trust, the beneficiary (your child, in this case) would still have 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 find that the Trustee has acted unreasonably, it can compel him to pay benefits to the beneficiary.

You will recall , however, that the Henson Trust is an absolute discretionary trust, meaning that the Trustee cannot be compelled (forced) to disburse money for the support of the beneficiary. In other words, 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. Theoretically, the Trustee could decide to never disburse any money from the trust and there would be nothing that anyone could do about it. But that is the crux of the matter, the good and the bad. That lack of control by your child is what is required to protect their access to government benefits. And also, incidentally, why you will want to choose your Trustee with great care. You are giving them a lot of power over your child's life.

So why is the Department taking the view that Henson Trusts are not valid in Nova Scotia and we are telling you otherwise?

READ MORE

Spin Me Some Magic ... Henson Trust Magic

We talked about the need for precicely correct wording in drafting a Henson Trust. Almost 'magic wording' ...

That your lawyer needs to know .

• the Trustee must be given "absolute and unfettered discretion"
  
• "shall not vest" ... no share of the income or capital of the Trust shall vest in the benificiary
  
• "the only interest he has shall be the amount paid to him ..."

Also, the usual practice would be to make "a gift over", meaning that after the child (the beneficiary of the Trust) dies, anything remaining in the Trust will pass to someone else.

Next up, we will look at the current status of the Henson Trust in Nova Scotia.

That's all for now, folks ...

**Once again, with grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'.

Using The Henson Trust Now ... Not Later

Last time we were discussing the Henson Trust, what it is and why it is so very important for our children. Now we will take a look at a couple of practical issues around the use of a Henson Trust.

What if my child has assets now and I need to protect their government benefits now?

In addition to its use in a Will, a Henson Trust can be used as an inter vivos trust vehicle ... meaning a Henson Trust can be used while the settlor (that's you or whoever owns the assets) is still alive. A person can set up a trust for someone else outside of a Will, while they are still alive. And you can use a Henson Trust to do this.

There was one gentleman at the Disability and Estate Planning Seminar who had created a Henson Trust for his son a few years ago. He wanted to test the trust while he was still alive to fight it, just in case there was be any difficulty with the Department of Community Services (DCS). Despite having been told by the DCS that a Henson Trust would not allow his son to keep receiving government benefits, there has been no problem. This supposed issue with the DCS will be discussed in a later post.

If you want to set up a Henson Trust for your child while you are still alive, into which you would presumably transfer assets now as well as anything your child will become entitled to under your Will after your death, make sure that you consult a lawyer. One who is familiar with Henson Trusts and what is required.

As always, and as stated in the side bar, nothing written here is meant to be taken as legal advice or opinion. Its general information. Always consult with a lawyer as to th specifics of your indvidual family situation.


**With grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'.

Protecting Your Child's Future With The Henson Trust

The Henson Trust was named after an Ontario man who wanted to pass his entire estate onto his disabled daughter. But if she became the sole beneficiary of the estate and therefore "owned" significant assets and/or property, the government would consider her ineligible for any social assisatance payments. Meaning, for example, that if she lived in Nova Scotia, she would be ineligible for any of those programs we discussed under the Province's Services for Persons with Disabilities Program.

However, the releveant regulations did allow a person in her position to have some money in hand and didn't hold it against a disabled person when a third party provided a discretionary benefit.

For this reason, Mr. Henson drafted his will so that his entire estate was transferred to three trustees to be held on his daughter's behalf. The trustees (and this is the oh so very important part) had the discretion to withhold or spend the income and capital to best serve the daughter's interests. For example, money from the estate could be used to buy her a TV or new clothes or pay for a chaperoned trip. And because these payments were considered discretionary benefits, she still qualified for government support.

What the will didn't do was give the daughter a legal claim to demand money. Unlike the traditional trust that parents often set up in their wills for their minor children, Henson's daughter would never be in a position to go to court and claim that the trustees were wrongfully withholding trust monies from her. It was precisely because she had no legal claim to the monies that the government could not treat the money as hers after she inherited it.

Despite this, the government still saw fit to withhold the daugher's social assistance after Henson died. Which meant that she that she (or more accurately her guardian) was forced to take the matter to court. The Ontario Court of Appeal ruled that the daughter was eligible for continued government benefits and ordered the payments to be reinstated. Unfortunately, it was a hollow victory for Henson's daughter as she died before the Court of Appeal could rule in her favour.

But it was a significant victory for the disabled.

READ MORE

Big News ... SPD Policy Documents Now Available

All Good Things Come To Those Who Wait...

At least that's what they say.
And they might just be right.

I am very pleased to report that the actual policy documents for the Direct Family Support, Independent Living Support and Alternative Family Support programs are all now available on the Department of Community Services website.

General information on each program can also be found on the DCS website here, here and here.
And, of course, on this blawg ... DFS, ILS, AFS and SPD Progam -What's In A Name.

Your Mileage May Vary... Increasing Provincial Benefits for the Adult Child who Lives at Home

In a recent post, I noted the discrepacy between what we were advised at The Disability and Estate Planning Seminar and the contents of the relevant portion of the Canada Revenue Agency site. And I suggested that it might be prudent for a person interested in claiming that particular credit, the Caregiver Credit, to consult with a tax lawyer.

The same advice might well apply here. I'm just going to pass on what we were told at the Seminar. Which went something like this:

If your adult child with a disability lives at home with you, he or she will be eligible for a certain amount of "provincial benefits". However, if that same adult child were living in some other environment, such as a supported living environment like a group home, they would be eligible to receive a much higher amount.

[Ed. note: We know that under the SPD policy, the child who lives at home would receive benefits pursuant the Direct Family Support policy and the child living in a different situation would receive benefits under the policy appropriate to that situation.]

You can increase the amount you receive for your adult child who lives at home by having that child enter into a written lease with you. Make the lease payment slightly higher than the provincial shelter amount and the child will become eligible for the increased benefit. Although the Department of Community Services may tell you that in order for your child to be eligible for the "shelter amount", they must live in a self-contained unit, you can point out that many individuals who live in rooming houses receive the shelter amount. And although the Department may not be too happy with situation, it is said that you should have a pretty good chance of success if the child can help with shopping and cooking. And even if it doesn't work, its still worth a try as you've lost nothing.

If you're interested in knowing what the provincial shelter rate is at the moment, go here. Scroll down to the bottom of the page. The "shelter allowance" is the very fist item under Appendix A. But remember, I am just passing on information on this one. As I said in the title, your mileage may vary ... which may be why God invented lawyers in the first place.


**With grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'.

Update: I neglected to mention that, both as I understand it and as set out by Mr. Pope, you will not be required to report the monies paid to you by your adult child on your Income Tax Return as you are providing support to a dependant. But its always good to double check with your accountant and lawyer.