The Great Pumpkin & Planning for Special Needs

by Oct 21, 2016Uncategorised

My son is absolutely obsessed with Charles Schultz’s Peanuts comics. He can tell you what date Sally first appeared in the comics, how Lucy was a baby at one point, and discuss when the Peanuts gang first appeared in a cancelled pre-cursor comic called “Li’l Folks.” Needless to say, now that October is upon us, discussion in our home inevitably turns to the Great Pumpkin.

Like many other Canadian children, he struggles with mental health issues, and his obsessive-compulsive factual knowledge of Peanuts is one of many results. We wouldn’t change him for the world though. He sees everything differently than most people do, which can be just as much a blessing as it can be a curse. We like to say the positives balance out the negatives, and both can be extreme.

Like many other Canadian parents, we’re concerned about what the future holds for our son. After lots of hard work and therapy, we think he’ll lead a very exciting and productive life, but we have to stop and think about our estate plans – particularly what we can do if things turn out differently for him.  

Planning for family members with special needs

When it comes to estate planning, I cannot overstate the importance of making sure each of your professional advisors understand any and all special needs that are specific to your family. I recently met with a client whose lawyer had written a will incorporating what’s known as a Henson Trust . It was brilliant work. A Henson trust is a special trust designed to ensure adult children who receive the Ontario Disability Support Pension don’t over inherit to the point where their benefits and access to programs and services are taken away. It’s a tricky aspect of estate planning, but also a very important one.

Unfortunately in this case, the client’s investment advisor wasn’t aware of the child’s special needs and had structured the family’s investment portfolio in such a way that would transfer most of the family’s assets directly to the child and bypass the will. This meant the disabled adult child would inherit too much money directly and be immediately removed from crucial support programs. Obviously this wasn’t a good scenario, especially given the fact that all the complex tricky work had been handled and the family thought everything was in order.

Integrated planning is critical. Make sure your financial security advisor, lawyer, accountant and others are fully aware of your specific family situation and receive regular updates when anything changes.

Ensuring adequate support for your dependents is crucial

In the case of disabled children in Ontario, your estate has a legal obligation to support anyone who is financially dependent on you. A court has the power to override any beneficiary designation on insurance policies, RRIF/RRSP assets, and your will if you fail to adequately provide for them. This can wreak havoc on tax planning if, for example, a charitable bequest is overridden, and the estate is required to pay significantly higher taxes.

We often see this scenario unfold in other situations as well, when it comes to alimony payments or failing to update a will after recognizing common-law status with a new partner, for example. This has also occurred when somebody who was providing support to elderly parents with limited resources dies.

Be sure to review your estate plans and ensure you make all your professional advisors aware of the planning updates that impact your financial situation.

Have a great Halloween season – and may the Great Pumpkin smile kindly on your estate.

The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. This information is general in nature, and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax advisor.


Image:  JD Hancock,  CC2.0