With another year having just past, it is a time for many, to reflect on our past year’s achievements and happy memories, for others, and you know who you are, the new year represents an opportunity to set new goals, and dare I say, embark on the dreaded New Years Resolution!

Losing that extra 10lbs, cleaning out that garage, running three times a week, renovating that basement suite are all noble goals that never seem to gain any momentum past the month of February. However, a New Years resolution that we should all pay particular attention to is the simple task of developing or revisiting our estate plan’s.

It may not sound like the most exciting and challenging of goals which one can set for the new year, however, developing an effective estate plan may be the most rewarding and financially sound, not to mention, ACHEIVABLE resolution you will ever encounter.

How then does one start the process? This of course is the million dollar question. For many of us, the thought of planning for our death is anything but attractive . For many, taking out the garbage or visiting the dentist for a root canal may seem more pleasant.

Therefore, initially, we must visualize the development of an estate plan as more than simply, “Who gets What When I die”, or, as I like to refer to it, as the “Three W’s Syndrome ”. An estate plan is much broader in scope and reflects on various legal and economic disciplines such as family, tax, and estate laws. A well thought out estate plan will not only benefit you when your no longer with us, but also while you accumulate and grow your wealth.

My first piece of advice to all my clients is, “DO YOUR HOMEWORK!” Educate yourself as to what an effective estate plan means to you. Ask questions, read articles and attend seminars to assist you in generating a level of knowledge that will make you comfortable in developing and refining your estate plan. Know what your limits are and don’t be afraid to ask for help. Estate Plans much like individuals are unique. No one plan will necessarily fit all. Prepare to differentiate yourself from that of your brother, neighbor or co-worker.

Although there are no legal requirement to seek professional advice when developing an estate plan, the option should be seriously considered so as to avoid future disappointment and unnecessary expense. The costs of seeking proper professional advice at the outset of developing an estate plan pales in comparison to the thousands of dollars which may be expended where no professional advice is sought.

Finally, and most importantly, make the development or revision of your estate plan a priority for the new year. The cost of a few hours of your time may result in thousands of dollars in savings to your estate and ultimately, your family.


I caution my readers that the information expressed in this article should in no way be construed as legal advice. If you would like further information on this or other topics please contact me at the address below.

Recent changes to the Income Tax Act over the past year now permit individuals at least 65  years of age to develop Alter Ego Trusts and Joint Spousal Trusts. For some, this may be an attractive estate planning vehicle and can serve as an alternative to a Will.

Similar to an Alter Ego or Joint Spousal Trust, an Inter Vivos Trust, or living trust, has always  been available to Canadians, however, its use as an alternative to a Will, (similar to a revocable Living Will in the US), was always unattractive in Canada because of the tax consequences involved in their use. The concern being that if you transfer to a trust an asset that has increased in value, this is a disposition and triggers immediate capital gains tax.

Under the Alter Ego or Joint Spousal Trust amendments, anyone over 65 can now transfer assets to this particular type of trust on a tax-deferred basis. In other words, the trust takes over the  asset at its cost; the tax on the gain is deferred until the disposition of the asset by the trust, or until the trust is terminated and the asset distributed to the beneficiaries. In short, the transfer is tax neutral. There are no income tax advantages, nor any disadvantages.

For the tax rules to apply, the income and capital must be solely for the benefit of the settlor or his/her spouse (that is, the original owner of the assets) during his or her lifetime. The settlor is also the trustee, so retains complete control over the assets until his or her death. He or she can name as beneficiaries of the trust on death whomever would have been beneficiaries under his or her Will, including charities. The trust can hold all or only some portions of the client’s estate.

If the trust holds everything, it replaces a Will, but with this important difference: as long as a testator has capacity, he or she can change a Will at any time, right up to the time of death; with a trust, it is not so easy to change. This can be a good thing (it avoids the risk of undue influence) and a not such a good thing (if urgent changes in beneficiary are legitimately desired).

There are two essential benefits of an Alter Ego or Joint Spousal Trust. Initially, everything transferred to the trust during one’s life is not in the estate on death, and is therefore free of probate fees and the costs of probate. Secondly, since the trust already owns the transferred assets at the time of death, they are not part of the estate so the Wills Variation Act does not  come in to play. This advantage is of particular importance with second marriages, where the potential frequently exists for a conflict between the testator’s children and the surviving second spouse. Once everything is in the trust, with both the wife and the children as beneficiaries in proportions the settlor has decided upon, then not only will fights after death be avoided, but the settlor can make clear to all parties during his or her remaining years that all is settled, fair and final.

The special tax treatment afforded to the Alter Ego Trust is available also to the Joint Spousal Trust, where distribution occurs only on the death of the surviving spouse. One or both can contribute to the trust (if the contributor is 65), and the income can only be used for the benefit of the settlor and the spouse during their joint lifetimes.

In appropriate circumstances, the Joint Spousal Trust could replace the very common Wills where each leaves everything to the other spouse, and on the survivor’s death, the remainder goes to the children or grandchildren.  But often in these cases, the spouse who believes he or she will  die first worries that the surviving spouse will remarry some gold-digger who will take everything from the kids! The Joint Spousal Trust would help this situation.

Despite the obvious advantages of these trusts–the saving of probate fees, the minimization of Wills Variation Act problems, and the protection against gold-diggers–one must be careful to remember the limitations to their use. Some examples: in the case of real estate, the transfer to the trust may trigger Property Purchaser Tax, which would counteract any savings in probate fees for properties over $300,000 in value. However, it should be noted that a Principle Residence along with its associated Principle Residence exemption is transferable to the Alter Ego Trust.

RRSPs and RRIFs cannot be transferred to the trust at this time. As well, where the estate consists of appreciating assets, it is important to check with an accountant to see if the savings  on probate fees would be offset by the need to pay greater capital gains tax on death, for the reason that a trust, unlike an individual, does not have personal exemptions available to claim in the year of death.

But subject to these limitations, I believe there are many situations where an Alter Ego Trust or a Joint Spousal Trust could be of great advantage in an estate plan, whether used as a  replacement to Wills or used alongside the Wills for particular assets only. As always, your particular situation should be assessed by an experienced professional before determining whether this vehicle will work for you.

As outlined through previous editions of “KRAMER’S LEGAL BRIEF’S”, there has been significant debate over the past two years as to the merit of eliminating the more common estate planning tool of the Enduring Power of Attorney (“EPA”) with that of the often more complicated and lesser known Representation Agreement (“RA”).

EPA’s, you will recall, are legal tools that allow an adult to appoint another person to manage their financial, legal and property affairs in the event of future mental incapacity. The enduring provision of these document’s enabled the donor of such authority to ensure that their chosen Attorney(s) could continue to fulfill their duties prior to and immediately after a determination beingmade that the donor was incapable.

RA’s were intended to combine the ability to manage an adults financial, legal, property and health care through one document utilizing Representative’s and Monitor’s. Unfortunately, the RA was not afforded much support from both the legal profession nor the financial community given their complex execution requirements as well as the uncertainty that was created through the development of such legal relationships. The result was a general refusal of many legal practitioners to draft or recommend RA’s to their clients for purposes of managing their respective financial, property and legal affairs. Rather, the practice had become one of developing EPA’s while they continued to exist for financial, property and legal decisions while reserving the RA for health care directives.

It was initially intended that our provincial government would eliminate the EPA and replace it with the full-blown RA’s beginning on September 5, 2002.

However, after much lobbying by the legal and financial community along with the election of a majority Liberal government, it was decided by BC Provincial Attorney General, Geoff Plant, that the proposed changes to how we manage incapacity required further debate, research and consultation.

Albert McClean, professor emeritus of law at the University of British Columbia, was appointed by the government in July of last year to assess the effectiveness of these legal planning tools in relation to financial, legal and property management.

On March 12, 2002, Professor McClean’s key recommendations were published. It was Professor McClean’s conclusion that EPA’s should continue to be the main tool for advance planning in financial, legal and property matters. However, it was recommended that RA’s continue to be retained for personal and health- care decisions. Finally, it was concluded by Professor McClean that RA’s continue to be authorized under Section 7 of the Representation Agreement Act for limited financial, personal and health-care matters.

In addition to McClean’s key recommendation, 39 other recommendations aim to strengthen EPA’s and simplify RA’s. The government has accepted McClean’s key recommendation and will consult with the public on the detailed recommendations. The public has been invited to make submissions and comments in writing up until July 12, 2002. For those wanting to take a more detailed review of the report, it is available online at www.ag.gov.bc.ca/public/McClean-Report.pdf, along with e-mail and mail contact addresses for responses.

It is anticipated that following this consultation, the government will prepare amendments to legislation governing RA’s and EPA’s, with the aim of introducing the changes in the next session. In the interim, both tools will continue to be available in their current forms.

What does this mean for each of you? In a nutshell, EPA’s will continue as they have for many years to be the main tool for advance planning in financial, legal and property matters while RA’s will continue to be utilized for personal and health-care decisions. It is anticipated that significant legislative changes will be forthcoming over the next year to the current Power of Attorney Act so as to prevent the inherent abuses seen with EPA’s over the years and which ultimately brought on the need for the RA. I will keep you all updated on such changes through future editions of “KRAMER’S LEGAL BRIEF’S”.

In my last edition, I commented on the benefits of having a “Will” in place to effectively plan for the distribution of your estate when you are no longer around.  Having a Will also enables you to make a contribution to a charity or non-profit organization that you or a family member may have a particularly strong association with.

The decision to plan a gift for tomorrow will also bring you benefits today. By creating your own legacy, you can take some control over the future and build a bridge to coming generations. The rewards go beyond the personal as you will better the lives of individuals and their families and inspire many people in our communities to work toward and invest in a brighter future for society. There are also fiscal advantages when contemplating a gift in your financial and estate plan.

Although many British Columbians continue to make donations to charitable organizations while they are alive, many of us are unaware of the various methods and available benefits associated with giving a charitable gift when we die. As governments continue to divest their social services responsibilities, the concept of community- building becomes vitally important to the survival of such organizations and their visions.

Many of us may query, “I really don’t have much to leave, so why bother!”. Giving a gift through your Will or a Trust does not have to be painful or costly. In fact, the Federal Government has recognized the importance of charitable giving by creating a more flexible environment for making a gift. Although receiving a tax benefit remains a strong incentive for many in making a charitable gift, the overriding rational for many continues to be the “social benefit” attached to making such a gift.

What are some of the charitable vehicles available for making a gift and which one(s) are most appropriate for me? A planned giving vehicle may be as simple as making cash bequest to a specified charitable organization in your Will. However, new approaches to planned giving may include life insurance policies, publicly traded securities or trusts. Each method will have its own associated benefits for the donor and the recipient. The following represent some of the more common planning vehicles worthy of consideration:

Bequests

Making a gift through your Will is a meaningful way to make a lasting commitment. You can bequeath a sum of money, an item, or any portion of your estate. You can also arrange to donate proceeds from your registered retirement savings plan (RRSP) or registered retirement investment fund (RRIF). Charitable tax receipts issued to your estate can offset taxes on your income in the year of death and in the previous year.

Life Insurance

Through relatively small life insurance premiums, you can provide a legacy of support. If you assign a new or an existing policy to a charitable organization, you will receive tax

receipts for the value of the policy and for subsequent premium payments. Insurance proceeds are contractual in nature and do not fall within your estate, thus, you can avoid probate fees and other taxes. Alternatively, you can designate a charitable organization as the beneficiary of the policy and a tax receipt will be issued to your estate.

Gifts involving Annuities

You can buy an annuity and then use a portion of the annuity payments to pay premiums on a life insurance policy assigned to a charitable organization. You’ll receive charitable tax receipts for the premium payments. Remarkably, with this charitable insured annuity plan, your income may increase. It is even possible to structure the gift so that both the charitable organization and your heirs receive a return on the investment by using the increased income to fund the premiums on a life insurance policy naming your heirs or your estate as the beneficiary.

Another option is a gift plus annuity which combines a donation to support the charitable entity with an annuity which would be purchased by the charitable organization on your behalf through a licensed insurance company. Guaranteed annuity payments to you (and/or your spouse) will continue throughout your lifetime, unaffected by changes in the economy or interest rates. Depending on your age, you will receive all or a portion of the annuity payments tax-free and may receive a tax receipt.

Trusts

You can make a gift today and benefit from the donated assets during your lifetime. You can accomplish this through a trust to which you transfer cash or assets. You or someone chosen by you will then receive either a fixed payment or interest income.

When you transfer property to a trust, you receive a charitable tax receipt for the present value of the charitable entity’s interest. Trust assets are placed outside your estate and the tax receipt may be used to reduce your taxes during your lifetime. When the trust terminates, the remaining assets will be used in the future to support the mission of the charitable organization of your choice.

Personal Assets and Real Estate

There are ways you can make a gift of personal or real property to a charitable organization and retain a right to use the property during your lifetime. The transferred property may be art, your residence or commercial real estate. In each case you will receive a charitable tax receipt for the present value of the charitable entity’s interest which will offset taxes on your income. In addition, you may continue to use the property or receive income from it. At the end of your lifetime, the property may be sold and the proceeds will support programs and services of the intended charitable organization, as you have directed.

A gift of publicly-listed securities also provides significant tax advantages. Only 25 per cent of the capital gain (half the regular inclusion rate) will be included in your income. The charitable tax receipt will not only offset the tax payable, but other income as well – which could reduce the cost of the gift to 35 cents on the dollar. Similar advantages exist for gifts of stocks received through employee stock options.

If you make a gift today, you will receive a tax receipt.  With the resulting tax savings, you could purchase a life insurance policy equal in value to the gift. The beneficiary of this policy could be your children or other heirs. In this way, the value of your lifetime gift would be replaced within your estate for your family’s benefit. This plan may provide additional advantages: if you retain the property and it appreciates, capital gains would be taxable and therefore would reduce the amount going to your heirs. Using life insurance in this way allows proceeds to be paid to your family, tax free and without probate fees.

Or, consider having your private company make a gift to a charitable entity. The company could then use the resulting tax savings to purchase a life insurance policy on your life. Proceeds from the policy go to the company and to your heirs, tax-free through a capital dividend account.

The answer to which planned giving vehicle is most appropriate for you must be assessed in light of your goals, your financial abilities and your creativity. Consultation with professional advisors (lawyer, accountant, financial planner) and the associated Planned Giving Manager of the intended charitable or non-profit organization will ensure that the right gift plan is chosen for you.

Preparing and updating your Will, and developing a plan for your estate, are two of the most important things you will ever do to protect your family and your legacy.

Approximately one half of Canadian adults do not have a Will. What they do not realize is that, in addition to protecting their families and legacies, estate planning is an essential part of a complete financial plan.

A Will is the articulation of your estate plan and the only legally recognized document that allows you to choose how your estate is to be distributed. It directs your estate’s assets to your beneficiaries or to trusts for their benefit, and names and empowers an executor to deal with your estate assets. It is also a reflection of your life’s work and the relationships you have forged. It is cause to look back and to think ahead. Ultimately, it is a source of peace of mind for you and comfort and security for your beneficiaries.

What happens if you die without a Will in British Columbia?

Initially, your estate would be distributed according to the provisions of the Estate Administration Act. This legislation applies a rigid formula to divide your estate among your spouse, children and relatives, and the results may be very different from what you really want. This legislation also fails to take advantage of current tax planning opportunities as well as addressing the needs of your beneficiaries? For example, if you have a spouse and two children, the first $65,000 of your estate would go to your spouse and the remainder would be divided three ways between your spouse and two children. Additionally, if your spouse was not listed as a joint owner of your principle residence, he or she would only be entitled to a life interest in the property upon your passing.

The absence of a Will will also eliminate the possibility of having your assets diverted to charitable organizations which you may have a strong association with. Furthermore, there will be no opportunity to allocate gifts to friends and other relatives and all of your assets may be converted to cash (i.e. family heirlooms may be sold and the proceeds distributed rather than passing on to your family).

A common law spouse is not a spouse under the Estate Administration Act but has a limited time to apply to the Court to seek a share of your estate. In order to do so, your common law spouse must have lived with you for 2 or more years and have been maintained by you. If you have minor children, their share of your  estate would be paid to the Public Guardian and Trustee and will remain there until they turn 19. Requests can be made for funds prior to the child turning 19 but such payment is at the discretion of the Public Guardian and Trustee. Additionally, you will not have the opportunity to choose guardians for your infant children. This differs from a Will where if you are the custodial parent you can appoint a guardian for your children.

Those British Columbian’s who die without a Will will also not have the benefit of choosing an individual to be the executor of their estate. Rather, an administrator for your estate will be appointed by the court and it may not be the individual whom you would have wanted to do the job. Anyone can apply to become the administrator of your estate however, preference goes to next of kin (spouse, children, parents). If no one comes forward, the Official Administrator for British Columbia will perform the task and that may take much longer due to the number of estates they administer. Furthermore, given that the appointment of an administrator must be made by the Court Order, this increases the cost and delays the appointment process. Additionally, unlike an executor named in a Will, an administrator may only start dealing with your estate when appointed by the Court. Finally, the administrator of your estate may have to post a bond to protect the assets of your estate, which is an added cost to the estate.  Thus, if the applicant for administration of your estate is not bondable another person or the Official Administrator will have to apply.

Not having a Will may also delay the administration of your estate, as the Estate Administration Act restricts an estate from being distributed until 1 year after your death. There are a series of other disadvantages to not having a Will including the possibility of your estate being assessed with a higher and unnecessary amount of probate fees.

Thus, developing a Will today and ensuring that it is regularly reviewed will provide you with the piece of mind that your wishes are being followed after you are no longer around. It will also assist in ensuring that your hard earned estate is directed towards your loved ones and those whom you believe should receive it and not necessarily the Canada Customs and Revenue Agency or the Provincial Government. Don’t delay, do your Will today!!!

As many of our members utilize home support services to varying degrees, I have decided to utilize this issue of “KRAMER’S LEGAL BRIEFS” to introduce our readers to a recent publication of The Voice of the Cerebral Palsied of Greater Vancouver, titled “The Rights and Responsibilities of People Receiving Home Support Services”.

Whether you are receiving home support services through an agency or via the Choices in Supports for Independent Living (CSIL) Program, this unique resource publication should be incorporated into your reading library.

Funded through a grant from the Law Foundation of British Columbia, the authors and editors of this extensively researched guide, consulted with numerous experts and organizations throughout BC to develop what is clearly a first for people receiving or contemplating receiving home support services in our Province.

Although the guide is written from a Lower Mainland perspective, it recognizes the very real differences which exist throughout British Columbia in the way home support programs are delivered region by region.

The guide is divided into 2 parts with Part 1 devoted to a thorough evaluation of the procedures and the legal requirements associated with hiring your own home support workers. The analysis begins with an overview of the CSIL program and the hiring process and then moves into a concise review of the applicable legislation affecting the employer/employee relationship.  The guide takes us on a journey through the relevant provisions of the Employment Standards Act, the Human Rights Act, the Worker Compensation Act, the Employment Insurance Act and the Income Tax Act. Finally, there is an excellent discussion on the issues of payroll requirements and financial/fiscal responsibility to the respective funders.

Part 2 of the guide is devoted to a complete discussion of the issues surrounding individuals receiving home support services from agencies. Initially, there is a brief overview of the Continuing Care Act and then a great discussion on topics such as unionization, collective agreements and agencies in general.

British Columbia has made tremendous progress over the last few in the area of Home Support, however, there continues to exist very real problems in the delivery of these services. A lack of consistency between regions, reductions in funding, services being cut and government’s unwillingness to enshrine the principles of home support on a nation basis are just a fewof the problems we must contend with as we enter this new decade.

Clearly, developing a high level of sophistication as it relates to the various issues affecting home support services is an important step in meeting the challenges we face today and in the future. This resource guide represents an excellent first step in meeting those challenges and thus, I applaud the dedicated individuals with The Voice of the Cerebral Palsied of Greater Vancouver who put together this well written and researched report.

For those of you who would like to receive a copy of the resource guide, please contact the office of The Voice of the Cerebral Palsied of Greater Vancouver at (604) 874-1741 or by Email: ytanabe@istar.ca..

As a final note, I wish to advise my readers that as a follow-up to the last edition of “KRAMER’S LEGAL BRIEFS”, which provided a review of the Representation Agreement Act, our government has succeeded in passing the Adult Guardianship Statutes Amendment Act (Bill 6) effective March 29, 2001. This Act contains amendments to ten laws related to adult guardianship. Most of the proposed amendments affect the Representation Agreement Act and will come into force on September 1, 2001. I will be devoting my next issue to a review of these changes and how they will affect you.

In closing, please be advised that effective March 15, 2001, my firm name has been changed to KMK LAW CORPORATION.

Significant amendments to the Representation Agreement Act (RSBC 1996) Chapter 405 (the “Act”) have been implemented through the introduction of Bill 6-The Adult Guardianship Statutes Amendment Act-2001 which was subsequently passed by the British Columbia legislature on March 29, 2001 (“Bill 6”). Bill 6 contains amendments to ten laws related to adult guardianship. Many of the proposed amendments affect the Act and will come into force on September 1, 2001. For an overview of what is a Representation Agreement (the “Agreement”), please see the March, 2001 edition of “KRAMER’S LEGAL BRIEFS”.

As indicated in the March, 2001 edition, the introduction of the Act initiated much discussion, debate, concern and controversy not only in the legal profession but also amongst the financial and investment industry, government and the community in general. Conclusions were made that the legislation was too complicated and lacking clarity in many areas.

In response to the mounting pressures placed on our government through the introduction of the Act along with the equally justifiable criticisms directed towards the design, practicality and implementation of the Act, a well respected member of the British Columbia bar and former ombudsperson, Ms. Dulcie McCallum, was commissioned during the middle of 2000 by the Public Guardian &

Trustee (“PGT”) to conduct a review and make recommendations in regards to potential amendments to the Act. During this same period, many other groups and organizations conducted their own review and analysis of the Act, including the Wills, Estates, and Trusts Subsection of the Canadian Bar Association, the financial industry and various community advocacy groups.

Many of the recommendations put forward by Ms. McCallum as well as the Canadian Bar Association, the financial community and other community advocacy organizations were subsequently implemented into what we know today as Bill 6.

Some of the highlights of Bill 6 include permitting British Columbian’s the opportunity to utilize the services of a notary public who has taken a special course to make Section 9 Agreements. Previously, only lawyers were authorized to assist in the making of Section 9 Agreements with general powers.

Additionally, enduring powers of attorney will continue for another year, to September 1, 2002, allowing sufficient time for everybody to become familiar with representation agreements and the improvements contained in Bill 6.

Valid enduring powers of attorney made before Sept. 1, 2002 will continue to remain in effect after this time.

The appointment of a monitor is now a mandatory requirement under Section 7 Agreements subject to a number of exclusions prescribed by Section 12 of the Act. Bill 6 has also modified the execution requirements provided in the Act and eliminated the requirements for witnesses to be present when a representative or alternate representative executes a Section 7 or 9 Agreement. Finally, a representative may now also delegate to a qualified investment specialist, including a mutual fund manager, all or part of the representatives authorities with respect to investment matters.

The amendments to the Act through Bill 6 are scheduled to come into effect on September 1, 2001. Additionally, revised regulations to the Act are currently in the drafting stages and should be available shortly.

Although there continues to be genuine concerns with respect to the legislation and its amendments along with a continued reluctance from the legal and financial community to accept and become involved in the process of developing Representation Agreements on behalf their client’s, it is apparent that Representation Agreements, in some form or another, will indeed have a place in our community.

These agreement’s enable all adult’s an opportunity to take control of their lives through carefully chosen representatives during a time when they may not otherwise be able to. The principles of self-determination with assisted or supported decision-making being available as needed lies at the heart of the legislation.

These are empowering concepts, especially for those individual’s who have been traditionally marginalized.

For more information on Representation Agreements and the amendments, please contact my office at (604) 622- 5550.

I’d like to begin this initial edition of Kramer’s Legal Briefs with a discussion of the interrelationship between the estate planning tool of a “trust” and the Disability Benefits Program Act (“DBA”). For those disabled individuals having an entitlement to such benefits under the DBA, a trust may be the most effective legal tool available to enable such individuals’ to continue receiving such benefits in circumstances where they may be about to receive a large financial gift, an inheritance or an accident settlement. Given that our provincial DBA program is income and asset tested, how you deal with such money and other assets may affect your ability to receive benefits under the DBA.

Initially, what is a trust? A trust is a legal relationship where someone (the “Trustee”) holds money or other assets for someone else (the “Beneficiary”). A trust may be created in a will, when someone dies (“a testamentary trust”), or it may be created during someone’s lifetime (“an inter vivos trust”). A trust created while someone is alive may be created by a disabled individual for his or her own benefit or it may be created by someone else.

For those individuals receiving Level 2 disability benefits, you may be familiar with the regulations of the DBA (the “Regulations”) as it relates to income and assets entitlements. The Regulations preclude an individual without dependents from receiving disability benefits where that individual has assets totaling more than $3,000 unless such assets are exempt assets. Exempt assets include such items as your clothing, automobile and home. A trust that either you or someone else sets up for your benefit may also qualify as an exempt asset.  The lifetime total for these and some other kinds of trusts totals $100,000 unless you can convince the Minister that your “disability costs” will be higher.

The Regulations also deal with income. Most money received by an individu al receiving disability benefits will be deducted dollar for dollar from that individual’s disability benefits cheque. Such income is called “unearned income”. However, certain income is considered exempt, which will permit an individual to keep such income without losing their disability benefits. For example, the Ministry currently permits an individual without dependents to keep $200 per month earned as wages (“earned income”). Income from investments or trusts is always “unearned income” unless such money is paid from a trust and is used for “disability-related costs”.

To be considered “exempt”, it is vital that any payments for such “disability-related costs” be made directly from the trust and fall into one of the following six categories:

  1. medical aids or supplies;
  2. caregiver and home support services;
  3. education and training;
  4. renovations to your home to accommodate your disability;
  5. necessary home repairs;
  6. any other items or services necessary to promote your independence, to a maximum of $5,484 a year.

There is no set limit on what you can spend from the trust on the first five categories (items a to e). For the last category (item f), payments must not exceed $5,484 a year to remain exempt. Examples of item “f” may include memberships in sports or social clubs. Clearly, from a planning perspective, this category offers an individual with a disability  the most flexibility in utilizing such trust funds.

Before deciding to set up a trust to protect your money (and your disability benefits), there are many important decisions you will have to make. For example, what type of assets are you going to put into the trust? Who is going to be the Trustee of the trust and who is going to get what is left in your trust after you die? Questions may also arise over the tax ramifications of setting up your trust? Finally, if you are receiving home support services, what effect, if any, will a trust have on your entitlement to such services?

These and other questions will need to be canvassed between you and your lawyer prior to setting up your trust.  Setting up a trust is a highly technical process requiring expertise in estate planning and taxation. Thus, please ensure that you retain the necessary legal and tax advice prior to setting up your trust.