How do you arrange an estate to provide security for a disabled dependant?
Wills are the primary method by which assets are distributed after death. But when a dependant requires ongoing financial and personal support, estate planning becomes about much more than deciding who receives what.
For one family we worked with, their greatest concern was what would happen to their son when they were no longer around to care for him. Their son had a disability that meant he would require ongoing support throughout his life. His parents had spent years providing that support themselves, and they wanted to make sure that care would continue long after they were gone.
They wanted to create a plan that would allow their son to maintain his lifestyle, provide him with the financial resources he would need, and establish clear responsibilities for those who would care for him. Just as importantly, they wanted contingencies in place in case the people they initially chose were no longer able to fulfill those responsibilities.
The goal was to create a plan that would provide their son with security while giving his parents greater peace of mind about his future.
Starting with the Difficult Conversations
The first step was having some difficult conversations.
Talking about death is never easy. When those conversations involve the future care of a child or dependant, they can become even more difficult. The family needed to think through questions that had largely been handled by the parents themselves: Who would provide care? Who would make financial decisions? Who would manage the inheritance? What would happen if one of those people could no longer fulfill their role?
By working through these questions in advance, the family was able to establish clear intentions and put a structure in place for the future.
Caregiver, executor and trustee roles were identified, along with backup individuals for each. This was an important part of the planning process. A good estate plan needs to account not only for what the parents want to happen, but also for the possibility that circumstances may change.
Preserving Access to Government Benefits
Another important consideration was how an inheritance could affect government disability benefits.
Depending on the program and province, disability assistance can be reduced or lost when an individual has assets or income above certain thresholds. As a result, leaving a significant inheritance directly to a person with a disability could potentially affect benefits that provide valuable ongoing support.
For this family, the objective was to make sure their son's inheritance worked alongside the government programs available to him rather than unintentionally reducing his access to them.
As part of the overall estate plan, we worked with the family's lawyers and accountants to incorporate a Registered Disability Savings Plan (RDSP) and establish a Henson trust to manage the larger inheritance.
The trust provided a structure through which assets could be managed for their son's benefit without placing the inheritance directly in his name. The objective was not simply to leave him money, but to create a framework that could provide financial support throughout his lifetime while preserving access to available government benefits, where permitted.
Planning Beyond the Estate
The estate plan was only one part of the family's overall strategy. They also needed to consider how their son's financial needs would be supported over the course of his lifetime.
We looked at the family's overall assets, the expected inheritance and the level of ongoing support their son would likely require. From there, we developed an investment strategy designed to balance long-term growth with the need to provide income and liquidity when required. This helped the family understand not only how their assets would be transferred, but how those assets could be managed after their passing to help support their son's lifestyle over many years.
RDSPs and Henson Trusts
For families planning for the long-term financial well-being of a child or family member with a disability, an RDSP and, where appropriate, a Henson trust can be important planning tools.
An RDSP is a federal registered savings plan designed to provide long-term financial support for eligible individuals with disabilities. Depending on the individual's circumstances, contributions may attract government grants and bonds, while investment growth is tax-deferred. Over time, an RDSP can become an important source of financial support.
A Henson trust is a type of fully discretionary trust that can be used to hold and manage assets for the benefit of a person with a disability. Depending on the province and the individual's circumstances, it may allow assets to be managed for their benefit while helping preserve access to certain means-tested government benefits.
These strategies are highly dependent on the individual's circumstances. RDSP eligibility and government incentives are governed federally, while disability assistance and the treatment of trusts are subject to provincial rules. Families should therefore work with qualified legal, tax and financial professionals when considering these strategies.
Creating Clarity for the Future
In this case, the parents were able to establish a clear plan for their son's future.
They knew who would be responsible for his care, who would manage his finances and who would oversee his inheritance. Backup arrangements were also established in case circumstances changed. An investment strategy was put in place to help support his lifestyle over the long term, and the estate structure was designed to work alongside the government benefits available to him.
Of course, no estate plan can account for every possible circumstance. Family dynamics can change, caregivers may become unavailable and financial needs can evolve over time. But thoughtful planning can reduce uncertainty and provide a clear framework for dealing with those changes. Ultimately, good estate planning is not just about deciding where your assets go when you die. For families with a dependant who will require lifelong support, it is about making sure the people who depend on you are cared for when you are no longer there to do it yourself.
For these parents, the result was more than an estate plan. It was the comfort of knowing they had done everything they could to provide their son with financial security, ongoing support and a plan for his future.
Jack Fournier, BSc, FMA, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency*
700-609 Granville St. Vancouver, BC
p: 604 895 3348
jack@beaconwealthpartners.ca
Travis Kidson, BSc, CFP®, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency*
700-609 Granville St. Vancouver, BC
p: 604 895 3486
travis@beaconwealthpartners.ca
This information has been prepared by Travis Kidson and Jack Fournier who are Portfolio Managers for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Managers can open accounts only in the provinces in which they are registered.
iA Private Wealth Inc. is a member o the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
*Insurance products are provided through iA Private Wealth Insurance Agency which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investors Protection Fund.
Beacon Wealth Partners is a personal trade name of Jack Fournier and Travis Kidson.