One of the more difficult areas of estate planning is providing for a mentally or physically disabled beneficiary.
The Issue
In most situations, a mentally or physically disabled beneficiary is, if they are adults, the recipient of provincial disability benefits. If someone who is receiving provincial funding receives a large capital bequest through a Will, the gift must be spent before they will again receive benefits. Some assets such as a house or a car might be permitted.
The Solution
The solution is to set up a discretionary trust within the Will or in a separate Trust (often referred to as a Henson Trust in Ontario). A discretionary trust means that a trustee has discretion as to how much money is spent on the beneficiary. It can also be set up so either the capital or the income could be spent on the beneficiary. An example of where capital might be used for the benefit of the beneficiary is the purchase of a house or perhaps a car. The goal is to make the funds last for the lifetime of the beneficiary. In this way, the beneficiary can receive the benefit of additional funds for the rest of his or her life.
Professional Trustee Services
Often it is suggested that the trustee for such a Trust not be a family member. This is because most discretionary Trusts provide that upon the death of the beneficiary there is a gift to other family members. If the trustee is one of these family members, the trustee is in a potential conflict-of-interest position. Any funds that are spent on the beneficiary are funds that are not available for the trustee or the trustee’s family members upon the death of the beneficiary.
In such cases, an independent trustee is sometimes named. Often it is wise to appoint a trust company in these circumstances. It might also be a good idea to appoint a trust company and a friend of the family who knows the needs of the disabled person to act together. Heritage Trust, if appointed, can look after the paperwork and regulatory matters and the friend can deal with the personal needs of the beneficiary. Proper planning will ultimately save your beneficiary money and provide a better quality of life.
Heritage Trust has significant experience acting as trustee of discretionary trusts for disabled beneficiaries. We are highly qualified and effectively juggle technical competence with empathy and responsiveness to the beneficiary and their family members.
Fees Offered
- For disability trusts of $250,000 or less, we offer a free (no charge) set up fee and annual care and management flat fee of $5000 act as trustee.
- If the trust is over $250,000 our set up fee is $5000, and the ongoing care and management fee is .3% of assets under management, with a minimum annual care and management fee of $5000.
Nicole Garton is president and co-founder of Heritage Trust.
Recognized by Best Lawyers in Canada for trusts and estates and family law, she previously chaired the Canadian Bar Association Wills and Trusts Subsection (Vancouver).
Contact Nicole by email or phone at (778) 742-5005 x216.
Heritage Trust is a leading non-deposit taking financial institution, regulated by the BC Financial Services Authority (BCFSA), a government agency of the Province of British Columbia. Heritage Trust offers caring and professional executor, trustee, power of attorney, committee, escrow and family office services to BC resident clients.
We welcome you to contact us.