Finances

Starting Out

Securing the future means planning today

In many ways, the special needs community is unique. Not only in terms of the strength that families develop in dealing with the concerns of having a loved one with a disability, but also in considering the myriad planning issues that must be taken into account when preparing for the future. If we want the best for our family members with disabilities, then we need to explore factors such as their entitlement to government programs, laws that affect them even after they reach the age of majority, and their relationships with siblings and other family members.

For more than 25 years, our team has assisted countless families, lawyers and long-term care consultants in the preparation of plans that help people with disabilities achieve their full potential, while providing the very best quality of life possible. The Bright Future Plan is designed to enhance the well-being of people with disabilities by developing a proactive strategy for their ongoing care and financial support, well before a parent or caregiver’s passing.

Along the way, we’ll highlight the wide range of tools that families with disabled loved ones should consider when developing a long-term care plan. Some of the most important include:

The Disability Tax Credit

This is one of the most valuable tax credits available to people with disabilities and their families. The Disability Tax Credit (DTC) is a non-refundable tax credit that can reduce the amount of tax that a person with a disability has to pay. Our accountants can help you obtain DTC approval and, potentially, a sizeable tax refund. If the DTC is not required by the person with a disability to reduce their taxable income to zero, then it may be transferred in whole or in part to a family member who supplied some or all of their basic necessities of life such as food, shelter and clothing. Even if the person with the disability is not living with you, you may still be able to claim the DTC if the person depends on you for regular and consistent support. You may be asked to provide receipts or other documents to support this claim.

Details of the Disability Amount can be found on the Canada Revenue Agency’s website. Learn more

The Canada Caregiver Credit (CCC)

The Canada Caregiver Credit is designed to provide tax relief to caregivers of dependents who have an infirmity and who are dependent on the caregiver for support because of that infirmity. The amount that can be claimed depends on the circumstances. It should be noted that the dependent person no longer has to live with the caregiver, but must be dependent upon the caregiver. Also, the Canada Caregiver Credit may be reduced when the dependent’s income is greater that a stated amount. Learn more

Ontario Disability Support Program

People with either physical or developmental disabilities in Ontario may be eligible to receive benefits under the Ontario Disability Support Program (ODSP). The program is available to people who are over 18 years of age and who meet a very closely regulated set of criteria. These rules surround issues of assets and income of the person with the disability and their medical condition. The purpose of this program is to provide a basic level of income, prescription drugs and dental care to adults with disabilities. For many people with disabilities in Ontario, it is important to maintain these benefits even though they are somewhat limited. It should also be noted that the benefits under this program are payable until the person with the disability reaches age 65, at which time the Canada Pension Plan, Old Age Security and the Guaranteed Income Supplement programs take over. Learn more

Planning For

Effective strategies to address everyday needs

The Bright Future Quality of Life Pyramid demonstrates how leveraging effective tools can provide the level of care and support that our disabled loved ones deserve. The first layer of the Quality of Life Pyramid represents the Ontario Disability Support Program. It is the disability pension that is available to our sons and daughters after they have reached age 18, but in order to qualify for this pension, people must adhere to a cumbersome set of rules. Sadly, these regulations force our sons and daughters to live well below the poverty line. That underscores the need to establish a Henson Trust—the middle layer of the Pyramid—in their name.

It is expected that the Henson Trust will be the primary source of money for quality of life purchases on behalf of the person with the disability. When parents die, the insurance policy proceeds are delivered tax-free to the trustees of the Henson Trust, along with any allocations from the parent’s estate. The trustees spend these funds within the rules and regulations of the ODSP to enhance the quality of life of the person with the disability. Throughout this entire process, the trustees can receive support and guidance from the Bright Future Trustee Support Program.

The final layer of the Quality of Life Pyramid is the Registered Disability Savings Plan. It is an optional level of the pyramid and will generally only be entered into once the ODSP and Henson Trust have been secured. The funds that come out of the RDSP are viewed as being a top-up to the Henson Trust funds. They may partially offset the negative effects of inflation on the funds that have been allocated to the trust.

Insurance to fund

Having a permanent life insurance policy in place on the parent(s) or guardian of a disabled child is a 100% secure way to provide funds at death. A permanent life policy will pay out tax-free at death, within 30 days, and proceeds can be used to fund a Henson trust, top up an RDSP, provide for a home or a caregiver. With life insurance, you have a guaranteed future sum of money for your children that you can establish today. And what you’ll pay to fund the insurance policy is significantly less than what you would need to save if you were hoping to build an equivalent future nest egg—but without the investment or longevity risk. Our insurance advisor will work with you to review your current insurance needs, budget and goals, and determine how insurance can work into your Bright Future Plan.

The RDSP: An indispensable long-term savings tool

The Registered Disability Savings Plan is a long-term savings plan for people with severe disabilities that helps enhance their financial well-being in the future. It involves significant contributions from the government, and earnings within the RDSP are not taxed until funds are withdrawn. Payments coming from the plan can be used for any purpose, but must begin no later than the year in which the person with the disability turns age 60. In order to qualify for the RDSP, the person with the disability must qualify and continue to qualify for the Disability Tax Credit under the rules of the Income Tax Act.

An RDSP contains three elements: private contributions, Canadian Disability Savings Grants and Canadian Disability Savings Bonds. Learn more