Most Ontario Disability Support Program (ODSP) recipients know of the $40,000 asset limit for single persons (or $50,000 for a couple, with an extra $500 for each dependent child). But what if family or friends of an ODSP recipient want to help them financially? Is there a limit to how much they can receive? What if they receive inheritance? Will ODSP terminate their benefits? What about payments from an Registered Disability Savings Plan (RDSP)?
$10,000 gift limit per annum
ODSP allows clients to receive $10,000 in gifts or voluntary payments in a 12-month period without affecting their benefits so long as they declare it to their ODSP worker. Any amounts over that $10,000 are counted as income.
Are there any exemptions?
Yes! Gifts can exceed the $10,000 limit provided they are:
- contributed into an Registered Disability Savings Plan (RDSP) or Registered Education Savings Plan (RESP), if qualified
- Used to purchase a principle residence
- Used to purchase an exempt vehicle
- Applied to the first and last months rent necessary to secure accommodations
In addition, if a gift or voluntary payment is used to purchase any approved disability related items or services, then it does not count towards the $10,000 limit. These types of gifts are exempt without a maximum. Examples include assistive devices such as wheelchairs, hearing aids, etc; Support Services such as nursing care, prescription drugs not covered by the ODSP health plan, air conditioners, accessibility related renovations or disability related education supports such as a specialized tutor.
While the amount is unlimited, there are two caveats to this unlimited gift amounts. The first is that the ODSP client should contact their caseworker before making the purchase to ensure they approve the item as disability related. The second is that ODSP staff must verify that the money was spend on the item by reviewing receipts and/or doctors notes.
The Inheritance trap – When provincial disability supports are at risk.
In Ontario, receiving an inheritance while on ODSP is both good and bad. While it provides much needed financial help, any inheritance that causes assets to exceed the $40,000 limit for singles or $50,000 for couples will result monthly cheques, prescription drug coverage, and dental benefits to be at risk of suspension.
What can be done? Are there options?
When an ODSP recipients receive an inheritance, ODSP allows a six month grace period to dispose of it into an exempt asset. If the recipient keeps more than $40,000 outside of an exempt assets past the six month window, their benefits will be suspended.
What are exempt assets?
ODSP does not count certain assets towards the limit. They are:
- Principle residence
- Secondary property with the requirement that the director is satisfied that the property is necessary for the health or well-being of the ODSP client.
- Primary vehicle. While a secondary vehicle is permitted, its value must be less than $15,000 and it must be used to transport the client or their dependent to and from their workplace.
- Registered Disability Savings Plan (RDSP)
- Registered Education Savings Plan (RESP)
- Pre-paid funerals
- Trust funds provided the capital does not exceed $100,000
- Henson trust with no upper limit
- Life insurance policies with a cash surrender policy of up to $100,000
- Student loans, grants, awards or bursaries
- Compensation awards for injury or death
- Payments received under the Ontario Autism Program
- Mortgages receivable
- Special governmental compensation payments
Payments from a Registered Disability Savings Plan
Under ODSP Directive 4.10, balances inside an Registered Disability Savings Plan (RDSP) are considered exempt assets. Similarly, withdrawals are also exempt as income. But what about when those assets are moved outside the RDSP after withdrawing? Will ODSP suspend monthly supports immediately?
Once the money is out of the RDSP, it loses its exempt status and It becomes a liquid asset. If an RDSP withdrawal results in the beneficiary exceeding the ODSP asset limit of $40,000 for singles, $50,000 for couples by the start of the following month, ODSP monthly support may be suspended.
The six month grace period?
A common point of confusion involves the six month grace period. Under ODSP Directive 4.1, the six month window applies specifically to gifts or voluntary payments and not to withdrawals from an RDSP. If a relative gives an ODSP recipient a cash gift with the intent that it be used to buy an exempt asset such as a vehicle, pay a first and last month’s rent deposit, or make a contribution into an RDSP, the recipient has six months to use those funds for that exact purpose before the cash counts against the ODSP asset limit ($40,000 for single and $50,000 for couples). However, when the beneficiary withdraws money from their RDSP, the six month grace period does not apply. If that cash sits in a non-exempt account (such as a chequing account, regular savings account or TFSA) and causes the beneficiary to exceed the asset limit by the first day of the following month, ODSP eligibility may be suspended.
Any income or payments should be reported to the ODSP worker
One of the biggest risks to ODSP eligibility isn’t the rules themselves, but the failure to report. ODSP recipients must notify their caseworker when they receive a payment from an RDSP as per ODSP Directive 5.1.
What is a Henson Trust?
A Henson Trust is an absolute discretionary trust. This means the money doesn’t belong to the beneficiary, it belongs to the trust, and a trustee has absolute and sole discretion regarding payments to the beneficiary. Since the beneficiary has no legal claim to the principal, ODSP does not count these funds towards their asset limit, allowing the client to remain eligible for provincial supports regardless of the trust’s value.
The drawback is that a Henson Trust must be established within the will of the person providing the inheritance. If the individual has already passed away without including these specific provisions, a formal testamentary Henson Trust cannot be retroactively created to protect those assets.