Disability Benefits and Estate Planning for a Disabled Beneficiary

In British Columbia, if a person over the age of 18 is living with a severe mental or physical impairment, they may qualify for financial assistance under the Employment and Assistance for Persons with Disabilities Act, S.B.C. 2002, C. 41 (the “Act”).

For an individual to qualify, a Medical Professional must provide an opinion that the individual’s impairment is likely to continue for at least two years.[1] An additional professional opinion is also required; it must state that the impairment “directly and significantly restricts the person’s ability to perform daily living activities … continuously, or periodically for extended periods,” and results in the person needing help to perform “daily living activities”.[2]

“Daily living activities” is defined in the Regulations to the Act:

• in relation to a person who has a severe physical impairment or a severe mental impairment, means the following activities:
  • prepare own meals;
  • manage personal finances;
  • shop for personal needs;
  • use public or personal transportation facilities;
  • perform housework to maintain the person's place of residence in acceptable sanitary condition;
  • move about indoors and outdoors;
  • perform personal hygiene and self care;
  • manage personal medication, and

• in relation to a person who has a severe mental impairment, includes the following activities:
  • make decisions about personal activities, care or finances;
  • relate to, communicate or interact with others effectively.[3]

The Act specifies that, “a person requires help in relation to a daily living activity if, in order to perform it, the person requires

• an assistive device,
• the significant help or supervision of another person, or
• the services of an assistance animal.”[4]

If you or someone you know may qualify for disability assistance and would like to know more, a good place to start is by checking here to see some options. There are also a number of helpful resources available here.

It is important to note that access to these benefits are “means-tested”. This means that that if a disabled individual who might otherwise qualify for assistance has assets in excess of the limit set by the Regulations ($100,000 for a single individual), they may no longer qualify for assistance.

This restriction on the value of the assets a disabled individual may have can have important estate planning implications for that individual’s friends and family members.

If one is considering adding a disabled beneficiary to one’s will, one should consider the effect that receiving that inheritance may have on the disabled individual’s ability to qualify for assistance. Similar considerations apply to any plans that may result in the disabled individual receiving a lump sum, e.g. being named as the beneficiary of a life insurance policy, RRSP, or TFSA.

While receiving a lump sum cash inheritance may be a windfall for most, if the person receiving it may lose their disability assistance payments as a result, the well-intentioned gift may end up being something of a mixed blessing.

Fortunately, if one wishes to provide for a disabled friend or family member in one’s will, there is mechanism that can help provide financial security for that individual while also reducing the risk that doing so will result in a loss or reduction of disability benefits.

One may use one’s will to create a discretionary trust for the benefit of the disabled individual. After one’s death, a trustee then holds and manages the funds for that individual. The trustee of such a trust is generally given the power to decide if, when, and how much of the trust fund is paid to the individual (or for the individual’s benefit). The disabled individual does not control the distribution of the funds held in trust. The idea behind this technique is that money may be available to help take care of the disabled individual without being considered an asset owned by that individual because they have no power to control the timing or amount of the distributions.

Because receiving a lump sum inheritance can dramatically curtail or eliminate access to disability assistance and may limit access to other support programs, it is important for anyone with a disabled spouse or child to consider the possibility of implementing this technique as part of their estate planning. It is, of course, always important to get sound professional advice tailored to your particular circumstances.

[1] Employment and Assistance for Persons with Disabilities Act, S.B.C. 2002, C. 41, s 2(a).

[2] Employment and Assistance for Persons with Disabilities Act, S.B.C. 2002, C. 41, s 2(b).

[3] Employment and Assistance for Persons with Disabilities Regulation, BC Reg 265/2002, s 2(1).

[4] Employment and Assistance for Persons with Disabilities Act, S.B.C. 2002, C. 41, s 2(3)(b).

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