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ODSP Asset and Income Exemption Limits

ODSP

In late 2017, the Ontario government increased the income and asset exemption limits for eligibility under the Ontario Disability Support Program (ODSP)[1].  Due to the often relentless demands on parents of children who have disabilities or other special needs, it is not surprising that even over a year later, many families are still unaware of these increases.

ODSP provides health related benefits and income support to persons with disabilities who are in financial need.  To be eligible for these benefits, a person must be at least 18 years old, an Ontario resident, be in financial need, and meet the program’s definition of a person with a disability (or a member of a prescribed class specifically defined in the legislation).

In general terms, “financial need” is determined if the cost of the person’s basic living expenses is more than the person’s income and assets.  In making this determination, ODSP looks at the nature and value of the person’s assets, as well as the person’s income from all sources.  If the person has a spouse, which is broadly defined in the legislation, and/or dependent children, then the collective household expenses, assets and income, are considered.

Assuming that the other conditions have been met, a single person is now eligible for ODSP if he or she:

  1. has no more than $40,000 in assets (with certain exceptions which are itemized in the regulations). This is up from $5,000 prior to September 2017; and
  2. has no more than $10,000 of income (with certain exceptions which are itemized in the regulations), in a 12-month period.  This is up from $6,000 prior to September 2017.

It should be noted that gifts or other voluntary payments, payments from a trust fund (including a Henson trust), or payments from a segregated fund, are considered “income” in the month those payments are received by an ODSP recipient, and will count towards the income limits, unless the gift or payment is exempt under the regulations.  Payments received from a charitable, religious or benevolent organization for example, are exempt.  Gifts or payments that are used for disability-related items or services (like assistive devices, prosthetics, or renovations to the home to improve accessibility) are also exempt under the regulations, provided that the gifts or payments have been pre-approved by the Director of ODSP.  Bear in mind that even if the gift or payment falls below the person’s allowable income when it is received, if there is money left over from the gift or payment in the following month (i.e. if some of the money has not been spent, or the gift has been invested or deposited into a bank account in the name of the ODSP recipient), then that amount is added to the other assets of the person and counted towards the $40,000 asset limit beginning in the following month.

As mentioned above, there are certain exemptions from the $40,000 asset test, including, but not limited to, the person’s interest in a principle residence, one motor vehicle, the cash surrender value of life insurance policies, Registered Disability Savings Plans (RDSPs), a prepaid funeral, and student loans. The asset test is not applied to these assets.

The 2017 increases to the asset and income limits, have offered welcome breathing room for the more than 500,000 people in Ontario benefitting from the provincial disability support program.

In the 2018 spring budget, the provincial government announced a number of additional changes to legislation that would benefit ODSP recipients and their families.  Some of the proposed changes included eliminating the asset and income limits on Tax Free Savings Account and RRSP savings, and increasing the amount of employment income an ODSP recipient could earn. However, following the 2018 election, the new provincial government announced that these change, among others, have been put on hold.  We are still waiting for announcements of what changes are still coming.

What has not changed over the years, is the importance of making adequate plans for the future of disabled family members.  This should include making a Will and using what is commonly referred to as a “Henson trust” in the Will.  A Henson trust is a tool used to avoid leaving an inheritance directly to a person who is receiving ODSP, or who may qualify for ODSP in the future.  The inheritance is held in trust instead and administered in the sole discretion of the appointed trustee(s).   When properly drafted and carefully administered, a Henson trust can ensure that a disabled beneficiary will not inadvertently lose his or her ODSP benefits. It allows the beneficiary to continue to receive the valuable government benefits, all the while having access, in the sole discretion of the trustee, to the trust assets to enhance the beneficiary’s quality of life.  A Henson trust can also be used for life insurance proceeds, a form of inheritance often overlooked when trying to preserve government benefits.   A Henson trust is not just any trust, and needs to be carefully drafted to meet the particular needs of the family and beneficiary, and to ensure the preservation of ODSP and other government benefits.  Advice from a lawyer with experience in this area is strongly recommended when making a Will or other testamentary disposition which includes a beneficiary with special needs.

[1] https://news.ontario.ca/mcys/en/2017/09/improving-ontarios-social-assistance-programs.html

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