There are always rules. And then there are exceptions to those rules.
To qualify for the Ontario Disability support Program (ODSP) you must be 18 years old and have a disability. You must be in financial need. But what exactly does financial need look like?
ODSP is often referred to as a “measure of last resort.” You could assume this means only people with no income or assets could qualify. Or, if you have an adult child with a disability who lives with you, you might think ODSP is out of the question, if you earn a respectable income. Don’t be quick to make these assumptions.
Social assistance programs, like ODSP, try to strike a balance. Refusing income support except for those who are entirely destitute, would have severe implications. And yet, lax financial restrictions could increase the number of people on social assistance, which comes at a cost. Defining what “financial need” should look like has been the cause of on-going, heated debates.
ODSP is comprised of a myriad of financial rules, limits, and restrictions. Rules that have been created and modified over many years. At the same time, exceptions to those rules were developed. Those aware of the rules but not the exceptions easily assume ODSP benefits are beyond their reach when that is often not be the case.
The financial eligibility criteria largely rest on a few key ODSP directives that focus on two areas: your assets and your income. Essentially, if you have too much or earn too much, you do not qualify.
ODSP policies detailing the treatment of income and asset are extensive and complex. ODSP’s main policy directive about assets, “Definition and Treatment of Assets”, is more than 10 pages on its own and then there are another nine more policies about the treatment of assets. ODSP also maintains another 18 policies about the treatment of income, with the primary policy, “Definition and Treatment of Income”, being almost 20 pages long.
Despite the complexity of the program’s policies, ODSP eligibility largely rests on a few core rules. In an attempt to boil down these rules…
ODSP ASSET LIMITS
Basic Asset Limit. To qualify for ODSP, you must have less than $40,000 in assets. If you are married, that limit is increased to $50,000 between the two of you. This includes money in the bank, investments, property, and other types of assets.
If the value of your assets exceeds $40,000, you do not qualify for ODSP.
If you have been approved for ODSP, your assets must remain under $40,000 to maintain your eligibility. Accumulate more than $40,000 and your ODSP benefits will be suspended for as long as your assets exceed the allowable amount.
ODSP INCOME LIMITS
Working or receiving income from other sources does not automatically put ODSP out of reach. It depends on how much income you earn each month and the source of that income.
Employment Income. If you have a job, your monthly wages can be a little more than twice the amount ODSP would provide you before you no longer qualify. A working person who is entitled to receive $1,269 per month from ODSP, would continue to receive a portion of this amount, unless they were earning $2,738 or more per month.
Canada Pension Plan Disability Benefits. Those receiving income benefits from CPP Disability can still qualify for ODSP, if the amount they receive from CPP-D is less than the amount they are entitled to from ODSP.
Gifts and Voluntary Payments. You can also receive financial support from family and friends without jeopardizing your eligibility for ODSP. ODSP recipients can receive up to $10,000 in the form of gifts and voluntary payments in a 12-month period. A voluntary payment includes money received from a trust.
Income is assessed monthly. If in one month you receive income that is not considered exempt, it will reduce your ODSP income benefits for that particular month and only that month.
These are boiled down explanations of the rules. It’s important to understand the basics. But going beyond the basics can make a world of difference. An awareness of the exceptions to these rules can mean the difference qualifying for ODSP or not.
Exceptions to the Rules
Not all assets are treated as assets.
Various assets are exempt from the $40,000 asset restriction. ODSP does not include the value of exempt assets when determining eligibility.
Here are some of the assets ODSP exempts:
- A Primary Residence. Owning the home that you live in does not affect your eligibility for ODSP. This exemption does not include owning a property if you do not live on it.
- A Vehicle. Owning one vehicle, regardless of its value, does not compromise ODSP eligibility.
- A Registered Disability Savings Plan. Any amount in a Registered Disability Savings Plan (RDSP) is also exempt. Up to $200,000 can be deposited into an RDSP account, plus up to $90,000 in government contributions without compromising ODSP eligibility. Investment growth in an RDSP is also exempt.
- A Henson Trust. A Henson trust is a particular type of trust where the trustees manage the assets in the trust at their “absolute discretion.” In many cases, parents will direct the proceeds of their estate or a life insurance policy to a Henson trust for a child with a disability. Assets in a Henson Trust are exempt from ODSP asset restrictions, regardless of the value of the assets.
- Inheritance Trust.* An inheritance or the proceeds of a life insurance policy, received outright, is considered a gift by ODSP. An inheritance trust can be created, even if a trust was not stipulated in the will. ODSP will treat up to $100,000 as an exempt asset.
- Cash Surrender Value of a Life Insurance Policy.* Many permanent life insurance policies include an investment component, typically referred to as “cash value”. Up to $100,000 of cash value in an insurance policy owned by an ODSP recipient is treated as exempt
- Segregated funds and Annuities.* Segregated funds and annuities are investments sold by insurance companies. Up to $100,000 in segregated funds and annuities are treated as exempt by ODSP.
*Note: A maximum of $100,000 held in an inheritance trust, cash surrender value in a life insurance policy, segregated funds and annuities, combined, is treated as exempt.
Utilizing these exemptions can save you or a family member from burning through assets at an accelerated rate. Determining which exemptions you should pursue depends on several factors, but here are two examples of how they can help:
Savings Exceed Asset Limits
Caroline, 35 years old, is no longer able to work because of a disability. she has worked for over 10 years and managed to save close to $150,000. She has recently qualified for the disability tax credit which allows her to open up a Registered Disability Savings Plan. She moves $99,000 into segregated funds and invests $16,000 in an RDSP account. With $115,000 now held in ODSP exempt assets, she satisfies ODSP’s financial criteria because the remaining $35,000 falls below the $40,000 asset limit.
Inheritance Threaten Eligibility
Reggie, has a severe developmental disability and receives ODSP. His uncle died and left Reggie an $80,000 inheritance. If the $80,000 is put into Reggie’s bank account, it would be treated as income in the month it is received, reducing his ODSP to zero for that month. It would also be treated as an asset, leaving him ineligible for ODSP until enough of it was spent to bring his assets down below $40,000.
Instead, Reggie’s parents set up an inheritance trust for the $80,000, safeguarding Reggie’s ODSP. Because the inheritance was placed in an inheritance trust it was not considered income in the month it was received, averting the loss of one month of income benefits. More importantly, the money is treated as exempt on an ongoing basis. Furthermore, as trustees of the trust, Reggie’s parents are able to manage the $80,000 for his benefit.
If your financial circumstances prevent you from qualifying for ODSP, I strongly advise you to consult with a financial professional or lawyer who has an extensive understanding of ODSP regulations and policy directives.