Persons with Disabilities (PWD) recipients can now receive and keep up to $100,000 in gifts or inheritances, without impacting their entitlement to monthly government disability assistance. This is a substantial increase from the previous limit of $5,000.
“Windfalls” from a motor vehicle accident settlement, or gifts from a parent or relative, or inheritance, are often used to put PWD recipients over the asset threshold and disentitle them from benefits. To avoid this, the recipient could establish a trust to hold their windfall, but it was a cumbersome approach, where recipients had to retain a lawyer to draft the trust and have it approved by the Ministry, and record keeping and payments out of the trust had to be carefully monitored to ensure they fell within Ministry regulations. The bureaucracy added unwanted cost and complexity. Now, however, as long as those windfalls stay under the $100,000 limits, there should be no need for the recipient to establish their own inter vivos trust.
Further, it appears (thus far anyway), that there will not be restrictions imposed on what the money from windfalls can be used for, adding a much needed element of financial autonomy to the PWD benefit regime in Canada. This also means that parents who desire to provide regular support payments to their disabled children can do so to a much broader extent, without jeopardizing the disabled person’s right to receive government disability benefits.
This new development changes the PWD situation very favourably on the whole. However, many parents and other caretakers of a disabled person will still have legitimate concerns over their disabled child’s (or other dependant’s) ability to manage money over the long term.
We will continue to recommend the use of disability trusts in estate planning in most cases where there are concerns over a disabled person’s ability to manage his or her financial affairs, to best preserve the transfer of wealth across generations.
To read the press release, click here.