A few weeks ago, I spoke with a frontline ODSP worker who described ODSP as a measure of last resort. In other words, ODSP is only for people facing financially desperate circumstances. Putting it simply, this is entirely false. Even middle-income families need to rely upon ODSP and have every right to do so.
Kevin and Naomi Brewer (not their real names) have a 22-year-old daughter, Sophie (also not her real name), who has a developmental disability. Sophie lives with her parents and will continue to live with them for at least the next few years. In many ways, Sophie is independent. She is able to use the TTC to get to her part-time job, she knows her way around the stores in her neighbourhood, she can make her own meals when needed, and she can manage her bank account with some help. Sophie hopes to move out at some point and her parents support that idea.
Kevin and Naomi firmly believe Sophie will always need their financial support. Even though their collective annual income is close to $160,000, they have had a difficult time managing expenses over the years. When Sophie was younger, Naomi didn`t work for close to 10 years because Sophie’s needs were much greater at that time. With reduced income over many years and covering significant expenses related to Sophie’s disability, planning for their own long-term future and putting things in place to safeguard Sophie`s financial security has been a real struggle. Like many families, they are concerned they won`t be able to tend to their own financial needs, support Sophie especially when she moves out and leave enough in their estate for Sophie after they have passed away. They simply can`t manage it all on their own.
Turning to government supports, such as the Ontario Disability Support Program (ODSP), may be difficult for some, but it shouldn`t be considered a measure of last resort. ODSP is for people in financial need. That does not mean the individual and their entire family must be destitute before ODSP becomes an option. Families like the Brewers may earn a solid income, but that does not mean Kevin and Naomi have the means to support their daughter entirely on their own and hope to maintain their own financial security. As an adult, Sophie is in financial need.
Even though Sophie still lives at home with her parents, she is still allowed to receive ODSP benefits. The basic ODSP rule is that a single person is not allowed to have more than $5,000 in assets. Her parents’ assets and income are not counted towards this $5,000 limit. She will receive a reduced amount from ODSP since she lives with her parents and does not pay rent, but she still has a legitimate right to ODSP regardless of how much money her parents have or earn.
Once Sophie moves out of her parents’ home, her ODSP benefits will increase if she is paying rent. Many single people without dependents currently receive about $1,075 per month. This amount will help pay many of Sophie’s expenses such as rent, but it is not enough to maintain a reasonable standard of living.
Kevin and Naomi will supplement Sophie’s ODSP on a monthly basis. They will continue to buy her clothes and groceries, take her out for dinner and give her spending money. As long as they are alive and healthy, they feel they can take care of Sophie and pay for any expenses she can’t cover with her ODSP.
But, there are looming questions that keep Kevin and Naomi up at night. How will they make sure they leave enough money to support Sophie after they have passed away? What if they spend more in retirement than they had hoped, because they live longer than expected, or need to pay for supported care due to illness? How will they make sure that any money they leave for Sophie after they have died is managed properly and does not jeopardize her ODSP?
Kevin and Naomi are not alone. Many parents have the same worries. Saving, investing, and estate planning are challenging for any family. Add ODSP into the mix and the complexity increases, significantly. On the one hand, ODSP helps Sophie and the Brewers on a month-to-month basis. On the other hand, ODSP’s rules restrict their long-term planning options. How can they help Sophie save if she is only allowed to have $5,000 in assets? How can they leave her an inheritance?
Many people understand the basics of ODSP. Very few people understand the details. Yes, a single person without dependents is not allowed to have more than $5,000 in assets, but there are exceptions. Those exceptions include:
- Registered Disability Savings Plan – With the advent of the Registered Disability Savings Plan, some people on ODSP are accumulating significant amounts of money in long-term savings without jeopardizing their ODSP benefits.
- Personal residence – A person receiving ODSP is allowed to own his or her own residence.
- Henson Trust: Many parents set up Henson Trusts to hold the assets they leave behind after they pass away. While the assets in the Henson Trust exist to support the beneficiary, they do not affect their ODSP.
- Up to $100,000 in a combination of cash value life insurance, segregated funds, and discretionary trusts.
There are other exemptions, but the ones mentioned above are very useful for families like the Brewers. They provide options and some flexibility. They will help the Brewers care for their daughter Sophie when they are older and after they pass away.
Determining which solutions to use, how to use them and for what purposes requires an understanding of the pros and cons of each one, but they clearly demonstrate ODSP is not a measure of last resort. Families, their financial advisors and even ODSP frontline workers need to go beyond the basics of ODSP to accomplish key pillars of planning that will safeguard financial security.
Hi Ron, If I am correct, In “Sophie’s” case she can still receive an increased amount of income from O.D.S.P even though she lives at home, she pays rent or board and logging which she gives to her parents to help out (what they do with this is up to them, they do not report rent from a family member on their taxes). She should submit a letter to O.D.S.P from her parents stating that she now pays rent or they provide Board and Lodging .From http://www.mcss.gov.on.ca/documents/en/mcss/social/directives/odsp/income_Support/6_3.pdf
“What is Board and Lodging
A board and lodging situation is one in which a recipient receives food and shelter from the same source.
In situations where the recipient’s circumstances are not clearly defined as either rent or board and lodging, the shelter arrangement is determined by reviewing the recipient’s food preparation practices.
If the landlord purchases and prepares the food, the recipient is a boarder. If the recipient purchases and prepares food separately for himself/herself and his/her dependants, then the recipient is in a rental situation. To be considered a renter, a recipient does not necessarily need to be living in self-contained quarters, but must purchase and prepare his/her own food”.Board and Lodging Amount
“All ODSP applicants/recipients in a board and lodging situation will have their budgetary requirements calculated based on the maximum board and lodging rate, as follows:
$768 for a single person;”
A number of my clients who have an adult child on ODSP living with them, charge them for room and board in order to increase the ODSP monthly amount. Thank you for your comment.
Also with any increase in her ODSP amount this can then be paid to the parents for rent or room and board, they could use the money to purchase RDSP,s or segregated funds or for whatever purpose that would benefit their daughter.
My issue is just that. Sophie whom the parents have a legal obligation to support, can collect partial or full ODSP, depending on her OWN earnings and assets … yet my entire retirement savings were stripped, the clawbacks exceed 100% sometimes on MY WORK and in MY BUSINESS (which my husband has no involvement or financial interest) and why isn’t HE entitled to keep his own benefits too?
Hi Angela. I am not sure I fully understand your post. Are you Sophie’s parent?
Mr. Malis….my situation very similar to “Sophies’ parents…my worries the same, except I am a single mother, full-time employed, but earning under $31000/yr. My son is on ODSP. He is 19, lives with me and I do all the cooking, laundry, cleaning, bill paying, etc for him. I do not think he will be able to live alone due to his intellectual disability,therefore, I will need to consider setting up a Henson fund for when I pass, but also for when my sister/brother-in-law pass, since they are both leaving money for my son (they are no longer together). My question to you is this…”Must I claim rent received by my son since he lives with me, and must he claim rent on our income tax? The worker put down $200 as a “rent” amount at our intial (and only) meeting and my accountant says I need to call it “rent” on income tax” I am not trying to get out of claiming more income, but I am taking full care of his needs since he is unable to do it. Would like to be able to set up a RDSP but no extra income to do so. Any advice you have would greatly help me. Thank you so very much.
Your questions regarding tax are really questions for an accountant. I would assume that you should be claiming the rent money you receive from your son on your income tax, but I don’t see why he would have to claim anything regarding income tax on his tax filing. Best to discuss this with your accountant.
You can still set up an RDSP account an receive the Bond contributions even if you are not able to contribute anything to the RDSP.
It would be a good idea for your sister and brother-in-law to do some estate planning that would possibly include Henson Trusts. It would be wise of you to investigate doing the same. You need to find a lawyer who understands and has experience with ODSP and Henson Trusts.
Hi I am a 32 year old male currently going through problems at the place I’m living at..my mother owns a place in another Town..Am I able to move in there and pay her rent?
A person on ODSP is allowed to live with parents. If they pay rent that is equal to or greater than the amount they receive in shelter from ODSP and they buy and prepare their own meals, it should not affect their ODSP. This assumes neither of the parents are also on ODSP. If the parent is also on ODSP, that would be a different story.
You should consult with your ODSP worker as every situation is different, but the explanation above is generally applicable.
Thanks I plan on moving in paying 425 month buy my own food I was just worried that odsp would have problem me living with Mom..she not rich can’t let me live there for free
It is important that you pay her rent. If you didn’t, ODSP could reduce your shelter allowance. If she charges you less than the maximum shelter amount provided by ODSP, they could reduce your ODSP by the difference between the max shelter amount and the amount you pay in rent.