Frequently Asked Questions
The Henson Trust
Ontario Disability Support Program (ODSP)
Registered Disability Savings Plan
Disability Tax Credit
Caregiver Tax Credits
Guardianship
The Henson Trust
Why do I need a Henson Trust?
If a family member with special needs is receiving Ontario disability support benefits, and if they are left an inheritance, that inheritance is considered an asset and will disqualify them from benefits unless special arrangements are made in the parents’ Will.
The only real solution to this inequity is a HENSON TRUST, created by the parents’ Will. Only available since 1989, when the case after which it is named was upheld by the Ontario Court of Appeal, it places estate assets in the care and control of a Trustee to be administered for the benefit of a beneficiary. Inheritances placed in a properly prepared Absolute Discretionary Trust are not the asset of the child and will not affect provincial benefits.
Many families have members who require assistance in handling their daily affairs, regardless of their other abilities. Special Beneficiaries often benefit from guidance in handling large sums of money or significant assets, temporarily or on an on-going basis.
Some beneficiaries may be unable or unwilling to seek guidance, and may at some point be left without care unless special provisions are put into place.
To solve these problems a Henson Trust must be created, during your lifetime (inter vivos) or according to the terms of your Will (testamentary). These Trusts are invaluable in planning for your child’s care when you are no longer there.
These special arrangements are necessary to properly ensure that loved ones will be given the extra care they deserve, and that inheritances will not be wasted. Specialized legal counsel is necessary to ensure that the drafting of Wills follows the court-tested arrangements required, and to continually consider any changes in provincial regulations and new case law.
Contact Ken today to discuss the benefits of a Henson Trust.
Ontario Disability Support Program (ODSP)
Why do some people receiving Ontario provincial disability benefits receive $799 each month while others receive $1020?
The $799 amount is the 'room and board' allowance. If a child
lives with the parent they will automatically be slotted into
this amount. The $1020 amount is composed of $454 for
shelter/rent and $566 for supplementary benefits for everything else.
By setting up a lease arrangement with the parents and having the parents charge at least the shelter allowance amount, the benefits should then be increased to the proper amount.
These shelter payments by a blood relative are not to be included as "rental" income.
http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-05-e.html#P1764_102360
Rental losses are not allowed if your rental operation is a cost-sharing arrangement rather than an operation to make a profit.
You can deduct your expenses only if you incur them to earn income. In certain cases, you may ask your son or daughter, or another relative living with you, to pay a small amount for the upkeep of your house or to cover the cost of groceries. You do not report this amount in your income, and you cannot claim rental expenses. This is, in fact, a cost-sharing arrangement, so you cannot claim a rental loss.
http://www.cra-arc.gc.ca/R/pub/tg/t4036/t4036-03-e.html#P560_53022
The child cannot then make use of the "tenant property tax" credit.
If the child is simply unable to shop or cook, even with supports, then the increased amount may be unavailable on the basis that the food and lodging is provided by the parents. This turns on the facts of each situation.
Registered Disability Savings Plan (RDSP)
Coming soon..
Disability Tax Credit
What is the 'disability tax credit'? I know some parents save on taxes by using this tax credit and others have never heard of it.
This tax credit is available whenever a child of any age is markedly restricted in the activities of daily living on an on-going basis.
The restrictions can be cognitive, developmental, physical or mental, or a combination of disabilities. This tax credit must be applied for and approved, by filing a T-2201 form with Canada Revenue Agency.
Once approved, the credit is transferred from the child who qualifies to a parent or other supporting person. The tax credit is only useful to someone who pays taxes, and in many cases the person with the disability has no taxable income.
The credit was recently increased, and now returns $1,600 each year to a taxpayer who makes use of it. It can presently be back filed to 1999, back ten years on a rolling annual basis after January 1, 2009.
In years prior to 2001 the tax credit only returns $1,000 per year, as that was the previous allowance.
Back filing for the full period, if applicable, in 2008 would return approximately $14,000 to the taxpayer.
Caregiver Tax Credit
I've heard about the 'caregiver credit' used by some families to reduce taxes. When does this apply?
If a child is over 18 years of age, on ODSP, and resides full time or substantially all of the time with the parent or other family member, then the family member qualifies as a care-giver of that child. They can then claim the 'care-giver tax credit' and pay approximately $600 less in taxes than they would have.
This credit applies in each ongoing year in which these factors exist. The credit came into effect in 1998, and can be back filed to 1999 applicable. This would return approximately $4,500 in taxes for a back filing from 2007.
This tax credit applies in the circumstances of any adult family member, not just children, for example an aged parent with survives on a small pension and who has been released from hospital after an operation.
Guardianship
Coming soon..
