Protecting Disability Benefits
Caregivers providing assistance to persons receiving provincial disability benefits may be unaware that those benefits could be at risk. A person entitled to receive an inheritance or personal settlement may become ineligible for future disability benefits. This article will review provincial disability benefits and the options available to remain eligible for those benefits.
To receive provincial disability benefits a person must be designated as a person with a disability. The Employment and Assistance for Persons with Disabilities Act (the “Act”) defines a person with a disability as a person who has a severe mental or physical impairment that is likely to continue for at least two years which significantly restricts the person’s ability to perform daily living activities.
To receive disability benefits a person must remain below regulated asset and income levels. For a single person with no dependents the current asset threshold is set at $100,000, and the income threshold is set at $9600 a year. A person who exceeds either threshold will have their disability benefits reduced or be ineligible to receive any of the benefit.
A person designated as a person with a disability may be entitled to a number of benefits. Disability benefits include: support payments, shelter payments, and supplements. As of April 1, 2017, support payments for a single person living alone are currently paid out at a rate of $606.42 a month, and shelter payments are paid out at a rate of $375 a month.
A person receiving disability payments may also receive supplements. A person with a disability is entitled to some supplements automatically and must apply for others. Automatic supplements include: MSP coverage, dental coverage, glasses, prescription drugs, and an annual bus pass. Non-automatic supplements include: diet allowances, nutritional supplements, medical equipment and devices, and medical transportation. The automatic and non-automatic supplements can provide a significant monthly benefit to the person in addition to the support and shelter payments.
A person who is entitled to receive funds through an inheritance or settlement and in jeopardy of losing their disability benefits has several options. Some of the options include: doing nothing, purchasing exempted assets, setting up a trust, or setting up an RDSP. These options should not be considered exclusive; a person may be wise to use several of the options concurrently.
I. DOING NOTHING
Doing nothing may be the most sensible option and should therefore be considered. While doing nothing will result in the loss of disability benefits, the loss of those benefits may be less than or commensurable to the costs of other options. Doing nothing may be the most prudent option if the person is nearing their 65th year, as they will no longer be eligible for disability benefits due to their age. A person may also choose to do nothing if the reporting, tracking, and record keeping requirements imposed by the Ministry to maintain disability benefits are too burdensome.
II. PURCHASING EXEMPTED ASSETS
The regulations to the Act (the “Regulations”) provide a list of exempt assets. An exempt asset will not be calculated towards a person’s $100,000 asset threshold. Therefore, a person will retain eligibility if they purchase sufficient exempt assets to bring their non-exempt assets below $100,000. Exempt assets may include: a home, a vehicle, clothing, household equipment, business tools, and prepaid funeral arrangements. Trusts and Registered Disability Savings Plans (RDSPs) may also be considered exempt assets and are discussed below.
III. SETTING UP A TRUST
Assets held in trust may be considered exempt assets. The trust must meet certain qualifications and requires approval from the Ministry. Once set up the assets held in the trust may be disbursed to the person receiving disability benefits. Prudence is necessary to avoid trust disbursements from being calculated as income. The Regulations include a list of exempt disbursements similar to its list of exempt assets. The following disbursements will not be calculated towards a person’s income threshold: devices or medical aids, caregiver services, education or training, and home renovations. In addition, the person on disability assistance may receive funds from the trust each year to help them live more independently.
II. SETTING UP A RDSP
The RDSP is a relatively new option available to eligible persons with disabilities and is intended to promote long terms savings. A person receiving disability assistance will not automatically qualify for the RDSP. A person must be eligible for the Disability Tax Credit (the “DTC”). Qualification for the DTC requires a “severe and prolonged impairment”. The person opening the account must be under the age of 60.
There are multiple benefits associated with the RDSP. The Canadian Government will contribute to the RDSP through the Canadian Disability Savings Grant (the “Grant”) and through the Canadian Disability Savings Bond (the “Bond”). Where a family’s annual income is below $90, 563, every year the Grant will pay out $3 for every $1 contributed on the first $500 and $2 for every $1 contributed on the next $1,000 of annual contribution. Therefore, if a person contributes $1,500 to the RDSP the Grant will provide an additional $3,500. The Bond provides up to $1,000 per year towards an RDSP irrespective of any private contributions. To receive the benefits of the Grant and Bond, funds should be held in the RDSP for a period of at least ten years.
All funds held in the RDSP are exempt assets under the Act and all withdrawals made from the RDSP are considered exempt income payments. Therefore, not only does a person with a disability receive the financial benefits of the RDSP but it will not affect his or her disability benefits.
A person receiving disability benefits may find those benefits at risk if they are entitled to funds from an inheritance or settlement. In order to continue receiving disability benefits a person with a disability and his or her caregiver should consider one of the options set out in this article.
This article is informational only. For advice on your specific situation, we would be pleased to assist.