Financial planning for disabled clients

There are 3.8 million Canadians with disabilities, according to Statistics Canada.

Currently 42.5% of Canadians over the age of 75 identify themselves as having some form of disability, with hearing loss, mobility issues and memory loss being among the most prevalent, Statistics Canada data shows.

Read: Tax changes may hurt disabled Canadians

Few Canadians have factored in the financial repercussions that can arise from having a disability or caring for a family member who becomes disabled, says Chris Buttigieg, senior manager, wealth planning strategy, BMO Financial Group. Reduced income and increased spending to cope with a disability can derail a financial plan. For example, a plan on track to last until at least the age of 90 could see all savings exhausted by the age of 77.

Both individuals living with a disability and those caring for them need to manage their financial wellbeing, says the BMO Wealth Institute.

Read: Plan for family members with special needs

A BMO Wealth Institute survey identified the top tools for improving the financial situation of those dealing with disabilities:

• Wills (35%);
• Powers of attorney (32%);
• Tax-Free Savings Account (TFSA) (32%);
• Investment accounts (27%);
• Registered Disability Savings Plan (RDSP) (5%).

Read: Maximize benefits of RESPs and RDSPs

A BMO Wealth Institute report also recommends that individuals with disabilities use an RDSP. In order to be eligible for an RDSP, individuals must first qualify for the Disability Tax Credit – a non-refundable tax credit that provides tax relief for individuals who have a severe and prolonged impairment in physical or mental functions. Anyone can contribute to an RDSP, so it gives people who want to help a way to do so. The RDSP is exempt from most provincial disability and income assistance benefits and people with disabilities can choose what to do with the money once it is withdrawn.

Staff

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