Plan for special-needs adult children

Every parent wants financial stability and independence for their children, but when you’re the parent of an adult child with special needs, that goal is even more important.

While many parents can get by, supplementing hired caregiver help with their own tireless efforts, there will be a time when you’re no longer around to provide that support. In a situation like this, careful estate planning is more important than ever.

Consider the situation of Joanne, a 68-year-old mother in Ontario, and her adult son, Jack, who’s 43 and has cerebral palsy.

Joanne is getting to an age where she can no longer care for her son’s day-to-day needs. The two are living in a bungalow—owned by Joanne, with a tenant—but they haven’t prepared financially to deal with Jack’s needs when Joanne passes away.

They sought the guidance of Herberts Berzins, a consultant with Investors Group in Whitby, Ont. He focuses on clients in Ontario with special needs.

“[Jack] needs help on everything from toileting to bathing, so the costs are quite substantial,” Berzins says. “There are going to be big changes after the demise of his mom because now we have to provide for attendant care support.”

Joanne wants Jack to inherit the estate when she dies, but she’s concerned the additional funds will affect Jack’s Ontario Disability Support Program (ODSP) payments.

But, there’s a solution: the ODSP regulations exempt up to $100,000 held in a trust from the asset calculation. That income and capital must be available to be used for the recipient’s maintenance.

“You have to have a will in place with a Henson Trust and you need to have someone in charge of the trust,” Berzins says. “Then they can take the assets and make them available to the person on ODSP, which will not be affected.”

The Henson Trust is a special trust that allows a trustee complete discretion so he or she can pay the necessary expenses of the person on ODSP, so your focus should be on deciding the right candidate for trustee.

“When you pick someone to be the trustee, make sure the person is reliable and has integrity,” says Berzins.

With the right trustee in place, a Henson trust can run smoothly and provide financial stability.

“Henson trusts are fairly straightforward,” Berzins says. “It allows the estate to put funds aside so the person on ODSP knows the money is there. It’s like a bank machine: you know [the amount] in the account, but the beneficiary doesn’t know the PIN.”

For Joanne, and others in her situation, this gives the ability to leave money to adult children, while not endangering essential ODSP payments, and also provides peace of mind that the money left in trust will be properly managed.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.