It is with the best of intentions that one makes a testamentary gift to his or her loved ones. However, if the recipient of such a gift is receiving benefits from the Ontario Disability Support Program (“ODSP”), such a bequest can have unintended consequences.
The ODSP program provides income support to residents of Ontario living with disabilities in order to assist them in meeting basic needs. In order to qualify, potential recipients must meet certain income and asset requirements. For a single person, the asset limit is currently $5,000. Assets are not limited to cash and recipients who have valuables exceeding this limit may be prevented from receiving or continuing to receive ODSP benefits. In addition, a recipient’s financial needs must continue to exceed his or her income in order for him or her to remain entitled to benefits.
The ODSP program has particular rules for the treatment of testamentary gifts. A testamentary trust of which an ODSP recipient is the beneficiary is not considered an asset provided that it does not exceed a value of $100,000, after which the amount exceeding $100,000 is considered an asset and subject to asset limits. In addition, any payments from the trust which exceed $6,000 per year are considered income and may result in the subtraction of the amount received from the benefits. Should the non-exempt payments exceed the amount of benefits to which the recipient is entitled, he or she may be deemed ineligible for future benefits. In addition, an assessment may be made that the recipient received benefits to which he or she was not entitled and, accordingly, these amounts may be considered an ‘overpayment’. Overpayments can be collected by reducing the amount of future benefits to the recipient or by any other means available to the government in the collection of debts.
For example, John Doe’s father passes away. John Doe’s father’s Will leaves John Doe $150,000 in trust. The result of this will be that $50,000 of the trust will be considered assets, which puts John Doe over the $5,000 asset limit and ends his entitlement for ODSP benefits. While the testator’s intentions were likely to provide for John, the effect of the gifts may be that he is in a worse long-term position than had the gift not have been made.
Accordingly, a testamentary gift to an ODSP beneficiary may have significant impact, including a finding that the beneficiary is no longer entitled to income support and/or that he or she received an overpayment which must be repaid.
In my next blog, I will discuss a tool which can be used by estates lawyers to assist in avoiding these unintended consequences.