ODSP asset and income restrictions are so limiting and frustrating that most people would choose to forgo ODSP altogether if money wasn’t an issue. That’s not the case for most, though.
Parents are very concerned about making sure their child’s financial security is maintained after they (the parents) pass away. Key aspects of estate planning focus on not only how to protect ODSP, but also how to supplement it because ODSP income will not maintain a reasonable standard of living.
While they are alive parents are able to supplement their child’s ODSP with their own assets – buy them groceries, clothes, other items, give them pocket money and take them out for meals and even vacations.
Parents can’t leave the assets from their estate in their son or daughter’s name, without threatening their ODSP.
There are a number of important ODSP “exempt assets”. The Henson Trust and the Registered Disability Savings Plan are two exempt assets that play a role in estate planning. To understand the Henson Trust https://reeganfinancial.com/supplementing-your-childs-odsp-after-your-own-death/. To read more about the RDSP https://reeganfinancial.com/rdsp/
ODSP is not concerned with the amount held in a Henson Trust. They are VERY concerned with how much comes out of the Henson Trust. There are strict limitations on how much money can be taken from a Henson Trust to pay for non-disability related items and expenses.
A person on ODSP is not allowed to receive more than $6000 every 12 months from most sources including, Henson Trusts, for non disability related items and expenses. If this limit is exceeded, ODSP benefits can be easily garnished or revoked altogether. While $10,000 of renovations to accommodate a person in a wheelchair on ODSP can be paid for with money from a Henson Trust because it is a disability related expense, the same amount from a Henson Trust used for a vacation (a non-disability related expense), ODSP benefits would be compromised.
A limit of $6,000 every 12 months is fairly meagre. I have ODSP clients in their 50s who have recently received inheritances and would like to travel, but they are limited by this $6,000 rule. It’s a frustrating experience having a supply of money they can’t access for certain types of expenses.
An alternative to the Henson Trust is the Registered Disability Savings Plan which is another ODSP exempt asset. While there is a deposit limit of $200,000 with RDSPs, any money withdrawn from an RDSP is not subject to the $6,000 limit, even if the money is used to cover the cost of a non-disability related expense. This is a serious advantage the RDSP has over other ODSP exempt assets like the Henson Trust.
I have one client in her 50s on ODSP who opened an RDSP account and deposited $200,000. She is now able to go on extended vacations by using money from the Rdsp to cover the cost of he trips without worrying about ODSP.
The Registered Disability Savings Plan has its own restrictions that should be considered, but the little known yet very important fact that any amount of money from an RDSP can be spent on non-disability related expenses can change the quality of one’s life dramatically without threatening ODSP.
How much money you set aside for your son or daughter is important. How it is structured – Henson Trust, RDSP – is significantly important as well.