Planning for disabilities

Dealing with the extra financial burden of a permanent disability can be overwhelming—there’s a lot to consider.

If a disability comes from workplace accident, expenses may be covered by the Workplace Safety and Insurance Board, but not all disabilities arise on the job. And provincial coverage varies. In Ontario, for example, the province covers 75% of significant equipment costs, which could include wheelchairs, orthopedic braces and breathing aids.

But for people with disabilities who face challenges in supporting themselves financially, their share of such costs can quickly become overwhelming.

Financial management

Barbara Turnbull was 18 when she was shot during a convenience store robbery in the early 1980s, leaving her paralyzed from the shoulders down. A decade later, she was struggling with finances, and in 1991, she came to Bennett March IPC in Toronto and began working with advisors Valerie March and later Kathleen Peace.

“[The strategy] covered the bigger picture of costs, taxes and what I need to live independently,” Turnbull says. “A central part of our conversation was looking at how often I’ll need a new vehicle, and other big-ticket items.”

When living with a disability, you’ll also need to build a cost list that goes beyond core expenses. That can include vitamins and supplements (which can run $500 a month), physiotherapy, buying a vehicle, modifying that vehicle ($25,000), modified computers and software, and other related peripheral expenses that can easily total thousands of dollars each year.

Non-medical costs come into play as well. One of Peace’s clients has a child with special needs and spends thousands each summer to send her children to camp. “They love it, and she regains her sanity,” Peace says. “It’s a non-negotiable expense.”

Peace does a comprehensive calculation that takes into account government and employer benefits, any settlement received from a lawsuit or insurer, anticipated equipment and care costs and other expenses unique to a person’s circumstances.

Another of Peace’s clients, Carolyn Pioro, was paralyzed in a trapeze accident in 2005. She received compensation meant to cover her current and future expenses.

In investing that sum, “The general approach is similar to anyone in their 30s planning for retirement,” Peace says. “We have a basic portfolio, 60% equity, 40% fixed income, with a maxed-out TFSA and RDSP.”

Avoiding mistakes

Half the battle of managing your finances while dealing with a permanent disability is simply avoiding mistakes.

“I’m fixing a lot of mistakes,” says Graeme Treeby, a Stouffville, Ont.-based financial planner who co-founded the Special Needs Planning Group, a consortium of lawyers and accountants. The group also includes planners who have children with disabilities and advise families with disabled children.

Asset rules are too often misunderstood. To qualify for support in Ontario, people cannot hold more than $5,000 in liquid assets.

“I have a client who has become disabled and can no longer work,” Treeby says. “His advisor told him to qualify for ODSP he would have to spend all of his RRSPs. That is one way of doing it, but not necessarily the best way.”

Treeby instead put the money into a segregated fund RRSP, which allows a person to hold up to $100,000 while continuing to qualify for government support.

Save without losing benefits

Segregated funds, RDSPs and Henson Trusts are the three key tools you can use to accumulate assets without jeopardizing government benefits.

For Henson Trusts, you’ll have to choose a trustee. Decide whether a family member or a professional trustee is best suited to manage the trust.

The ramifications of not using a Henson Trust are significant.

“I get a call every second day from executors saying their mom or dad has died, an inheritance exists and they heard there should be a Henson Trust,” says Kenneth Pope, an Ottawa-based lawyer.

“Most times we can fix it, but the trusts should be drafted into the will in advance, not at the last minute.”