Disability Trusts: Typical Scenarios

Given the above, these are a couple of typical scenarios that come up:

Person on PWD, 30 years old, full capacity, with $430K inheritance:

  1. Set up a discretionary trust with $430K. If they have the DTC, set up an RDSP with annual contributions.
    • Pros: Simple, they’ll get $90,000 in free government grants/bonds
    • Cons: They lose control of their money (need an independent trustee)
  2. Set up a non-discretionary trust for $200K, put $200K in an RDSP, and have $30K as a personal asset.
    • Pros: The PWD recipient maintains full control of their assets
    • Cons: Will only get between $4500 and $36,000 in free government grants/bonds (depending on back contributions), may get PWD reduced if the $30K earns any income

Person on PWD, 40 years old, full capacity, with $900K inheritance:

  1. Set up a discretionary trust with $900K. If they have the DTC, set up an RDSP with annual contributions.
    • Pros: Simple, they’ll get almost $90,000 in free government grants/bonds
    • Cons: They lose control of their money (need an independent trustee), might have tax issues – higher income, if they’re on rent subsidy/home care – might lose subsidy/pay higher per diem rate.
  2. If inheritance is from a parent/grandparent, and they have the DTC, apply under s. 60 of WESA to create a Qualified Disability Trust, set up an RDSP with annual contributions.
    • Pros: No tax problems, won’t lose any benefits, and they’ll get $90,000 in free government grants/bonds
    • Cons: Need to make a court application. They lose control of their money (need an independent trustee)
  3. Buy home, place remainder in non-discretionary trust/RDSP.
    • Pros: Keep control of own money, they’ll get about $80,000 in free government grants/bonds
    • Cons: All the issues of home ownership. If they need to move out, they’ll lose PWD.
  4. Set up a non-discretionary trust for $700K, and put $200K in an RDSP
    • Pros: The PWD recipient maintains full control of their assets
    • Cons: Need to get Ministerial permission for the increased limit of the non-discretionary trust – may be a crap-shoot given his/her age. Will lose PWD if can’t get increased limit. Will only get between $4500 and $36,000 in free government grants/bonds (depending on back contributions).

There are obviously other options, but these examples show how, by understanding the rules, you can give your people a variety of options.

Key resources

  • CLE’s Annotated Estates Practice (Annual)
  • CLE’s Public Guardian and Trustee Handbook
  • Chow/Prior Taxation of Trusts and Estates (Annual) Thomson Reuters
  • Employment and Assistance for Persons with Disabilities Regs (Go online to BCLAWS, as they’re updated every month.)