Re Zaleschuk

 

Discretionary trusts are often drafted broadly permitting the trustees “absolute and uncontrolled discretion.” This may be so, even when the will maker or settlor had in mind creating a benefit for one beneficiary. Courts are reluctant to interfere with the trustee’s discretion in such cases, as long as the trustee is acting reasonably and in good faith.

In a recent case, Re Zaleschuk, 2022 BCSC 943, Justice A. Ross declined to remove trustees who had refused various requests for funds made by a beneficiary’s mother on behalf of the beneficiary. After Kenneth Zaleschuk (“Kenneth Sr.”) was diagnosed with cancer in 2014, he settled a trust for his son, Kenneth Jr., a young adult who had a learning disability and was unable to live independently. Kenneth Sr. was the initial trustee, and named his sisters as his successor trustees. His sisters became the trustees following Kenneth Sr.’s death in 2015.

Kenneth Jr. lived with his mother Marina Zaleschuck. She and Kenneth Sr. and divorced and there was evidence from Kenneth Sr.’s lawyer and financial advisor that in settling the trust, Kenneth Sr. was concerned about protecting the funds from his former spouse, and making sure there were sufficient funds for his son for life.

The trustees refused several requests from Marina for funds for Kenneth Jr. including funds for a motorized scooter, glasses, massage and acupuncture treatments, a new phone, a new laptop, travel expenses for a trip to Europe and a new headboard.

A petition was filed for Kenneth Jr. to remove his aunts as trustees and replace them with his mother. Although the petition was brought in his name, the trustees alleged that the litigation was being driven by his mother who had a power of attorney for him.

The trustees had provided funds totaling about $26,000 for Kenneth Jr. including travel expenses for trips with his sister, Marie, glasses and a helmet. They provided reasons for denying Marina’s requests including that she did not follow the procedure they put in place for requests, that they considered that some expenses were for items he did not need or, in the case of the scooter, potentially dangerous, and that some of the expenses were potentially covered under his disability benefits. They were willing to step aside as trustees provided that a professional trustee was appointed, but opposed Marina becoming the trustee.

In declining to remove the trustees, Justice Ross found that they were acting properly within the scope of their discretion. Justice Ross wrote:

[80]         Despite the criticisms leveled by the petitioner, I note that:

a)    the Trustees have released Trust funds to the benefit of Kenneth Jr. for travel and other items;

b)    they have considered and rejected other expenditures on the basis that they were not in Kenneth Jr.’s best interests (e.g., the motorized scooter) or they were unsure whether the Province may be reimbursing the expense;

c)     their actions have resulted in the capital increasing by more than $200,000 since 2015.

[81]         Although complaints have been leveled regarding the decisions of the current Trustees, I accept their submission that the Trust Deed imbues them with the full discretion to decide whether to pay amounts out of the Trust. On that point I accept this overarching submission of the Trustees:

They are exercising their discretion (as provided in the provisions of the Trust Deed) to make sure that there are sufficient funds to care for Kenneth Jr. for the rest of his life. At present, Kenneth Jr. lives with his mother and his regular expenses are covered by his disability benefits paid by the Province. At some point in the future, he will not be able to rely on living with his mother. The Trustees are administering the Trust in a fashion that will best ensure that there are funds available for his care in his later years. The Trustees submit that the Trust Document provides them with the full discretion to make those decisions.

Supreme Court of Canada Overturns B.C. Court of Appeal Decision in S.A. v. Metro Vancouver Housing Corp

The Supreme Court of Canada, in S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4, overturned the decision of the British Columbia Court of Appeal, a decision I wrote about here. This case deals with the use of a discretionary trust to provide benefits for a person with disabilities without jeopardising other benefits that are means tested. These trusts are sometimes referred to as Henson Trusts, and in many provinces, including British Columbia, are an effective way of preserving the person’s provincial disability benefits.

S.A. is a person with disabilities who lives in a subsidized rental residence provided by the Metro Vancouver Housing Corporation. The Metro Vancouver Housing Corporation also provides additional rental assistance to some of its residents who meet certain criteria, including having assets below a certain amount.

S.A. is the beneficiary of a trust, created by court order varying her father’s will. She and her sister are co-trustees of the trust. The terms of the trust provide that the trustees have discretion to decide if and when to make payments to her. Although she is one of the trustees, she and her sister must make decisions unanimously. The terms of the trust do not permit her to collapse it and take the funds. Accordingly, she does not have the ability to unilaterally take money out of trust for herself.

To receive additional rent assistance, S.A. is required to provide verification of her income and assets. She disclosed to the Metro Vancouver Housing Corporation that she was the beneficiary of the trust, but declined to provide any information about the trust assets on the grounds that it was not relevant to her eligibility. Metro Vancouver Housing Corp refused to consider her application for additional rent assistance, without further disclosure.

She unsuccessfully sought a declaration from the Supreme Court of British Columbia that the discretionary trust was not an asset within the meaning of her tenancy agreement or the application for additional rent assistance. She was also unsuccessful in her appeal to the Court of Appeal.

The majority of the Supreme Court of Canada allowed her appeal and declared that she has the right to have her application for a rent subsidy considered by the Metro Vancouver Housing Corp., and that her interest in the trust is not “an asset” for the purpose of deciding her application.

The outcome turned on the majority’s interpretation of the word “asset” in the contracts between S.A. and the Metro Vancouver Housing Corp. and in particular the Assistance Application. The majority concluded that “asset” refers to something that can be used by the applicant to discharge her debts and liabilities. Because S.A. did not have the control over whether she receives any funds held in trust, the funds are not an asset for the purpose of the application. Madam Justice Côté wrote:

[48]                          For this reason, a reasonable person who interprets the Assistance Application objectively and without reference to the Asset Ceiling Policy would understand the word “assets” to mean an applicant’s property or interest(s) in property that can actually be used to discharge his or her debts and liabilities, including the monthly rent that the applicant owes to MVHC. Given the purpose of the Rental Assistance Program, there is no reason why MVHC would concern itself with a financial resource — like a contingent interest in a trust — that an applicant cannot use in order to pay his or her monthly rent.  

What are the implications of this case? On the one hand, it is important to keep in mind that the Court here considered a particular program and contract. It is possible to define “asset” differently and in a manner that includes an interest in a discretionary trust.  Madam Justice Côté expressly stated that her “reasons should not be taken to suggest that the interest of a person with disabilities in a properly constituted Henson trust can never be treated as an “asset” for any purpose whatsoever.”

On the other hand, the analysis is likely to affect how courts interpret the term “asset” in other contracts or legislation in similar circumstances unless the term is defined in a manner that clearly brings interests in discretionary trusts within the definition.

The majority’s analysis of a beneficiary’s interest in a discretionary trust is helpful, and may have implications on the interpretation of legislation, such as some of the recent British Columbia legislation and proposed legislation with vague, circuitous definitions of “beneficial owner.”

Madam Justice Côté characterized S.A.’s interest as follows:

[36]                          It is thus clear that, although the Trustees have an obligation to consider whether to make distributions out of the Trust for S.A.’s care and maintenance, they are not actually required to distribute any of the Trust’s assets either to her or for her benefit. Unlike the beneficiary of a fixed trust (i.e. a trust where the trustee has no discretion as to distributions to the beneficiaries), S.A. therefore does not have an enforceable right to receive anything unless and until the Trustees decide to exercise their discretion in her favour. 

….

[39]                          The foregoing analysis makes two things clear. First, the terms of the Trust provide the Trustees with exclusive discretion as to whether payments should be made to S.A. While the Trustees must periodically consider whether distributions should be made, they are not obliged to exercise this discretion in any particular manner. Second, the structure of the Trust prevents S.A. from terminating the Trust on her own under the rule in Saunders v. Vautier. As a result, S.A. has no enforceable right to receive any of the Trust’s income or capital: unless and until the Trustees exercise their discretion in her favour, S.A.’s interest in the Trust is akin to a mere hope that some or all of its property will be distributed to her at some point in the future. 

The majority also approval of the decision in Ontario (Director of Income Maintenance Branch of the Ministry of Community and Social Services) v. Henson (1987), 26 O.A.C. 332, aff’d (1989), 36 E.T.R. 192 (Ont. C.A.), from which the name “Henson trust” is derived.

Assets Held in a Discretionary Trust May Affect Some Types of Assistance for Beneficiaries with Disabilities (But Still Often a Good Idea)

[The B.C. Court of Appeal decision in S.A. v. Metro Vancouver Housing Corporation, 2017 BCCA 2, discussed below has been overturned by the Supreme Court of Canada, 2019 SCC 4. You can read my post on the Supreme Court of Canada decision here.]

I have often suggested to clients with children or other intended beneficiaries of their estates with disabilities that they consider creating discretionary trusts for the beneficiary with a disability if the beneficiary is eligible for British Columbia benefits for persons with disability. For the purpose of determining whether someone is eligible for these provincial benefits, discretionary trusts are not included in that person’s assets. The Provincial Government will also allow a person with a disability who has received an inheritance or perhaps a settlement for a personal injury into a trust to qualify for the disability benefits.

I have discussed these trusts, sometimes referred to as Henson Trusts (named after the Ontario decision of The Minister of Community and Social Services v Henson, [1987] OJ No 1121, aff’d [1989] OJ No 2093 (Ont CA)) here. In a fully discretionary trust, the beneficiary has no right to the income or capital, except to the extent that the trustee exercises her discretion to make payments to the beneficiary.

Although discretionary trusts are a good way of making provision for a person with disability, allowing that person to receive provincial disability benefits, while allowing the trustee of the trust to use the assets in a manner that promotes the person’s independence, the trust may still affect the person with a disability’s eligibility for other programs.

This issue was recently highlighted in the British Columbia Court of Appeal decision in S.A. v. Metro Vancouver Housing Corporation, 2017 BCCA 2. S.A. is a person with disabilities who lives in a subsidized rental residence provided by the Metro Vancouver Housing Corporation. The Metro Vancouver Housing Corporation also provides additional rental assistance to some of its residents who meet certain criteria, including having assets below a certain amount.

S.A. is the beneficiary of a trust, created by court order varying her father’s will. To receive addition rent assistance, S.A. is required to provide verification of her income and assets. She disclosed to the Metro Vancouver Housing Corporation that she was the beneficiary of the trust, but declined to provide any information about the trust assets on the grounds that it was not relevant to her eligibility.

She unsuccessfully sought a declaration from the Supreme Court of British Columbia that the discretionary trust was not an asset within the meaning of her tenancy agreement or the application for additional rent assistance. She appealed the decision to the Court of Appeal, and the Disability Alliance B.C. intervened in support of her position.

Mr. Justice Goepel, writing for the Court of Appeal, held that the Metro Vancouver Housing Corporation was entitled to disclosure of further information about the trust assets. Different programs have different eligibility criteria. Metro Vancouver Housing Corporation has limited funds available for additional rent assistance, and information about discretionary trusts is relevant to choosing which applicants to provide the assistance.

Mr. Justice Goepel wrote at paragraphs 47 through 49 and 54 through 58,

[47]         I accept the intervenor’s submissions that discretionary trusts play an important role in promoting the independence and full citizenship of PWDs. That said, discretionary trusts also provide some individuals with benefits unavailable to others who are not beneficiaries of such trusts. Whether such benefits should be considered in determining which individuals should receive public assistance raises difficult public policy questions. I do not accept the intervenor’s broad contention that if this Court allows MVHC to take into account an interest in a Henson trust, it would affect not just this housing assistance program but also every other form of social assistance that relies on an eligibility test based on asset value. Each social assistance program has its own individual eligibility criteria. Whether benefits from a discretionary trust must be taken into account will vary from program to program and depend upon the rules and regulations that govern eligibility for any particular program.

[48]         The issue underlying this litigation is what information MVHC can request from tenants in determining whether to grant rental assistance. In the specific context of this case, the question is whether MVHC can require S.A. to provide additional details of the Trust of which she is a beneficiary over and above the information she has provided to date.

[49]         I note at the outset that many of the submissions have lost sight of this fundamental question. The parties have made extensive submissions concerning the tenancy agreement, the nature of the Trust and the difficulty valuing the Trust given its discretionary nature. In doing so, they have conflated the information that MVHC can consider in determining the eligibility of a tenant for rental assistance and the material it may consider in determining which eligible applicants will actually receive rental assistance. This confusion is perhaps understandable given MVHC’s letter of April 23, 2015 that stated it required particulars of the Trust to determine S.A.’s eligibility for additional rental assistance. With respect, the question is not limited to determining S.A.’s eligibility for rental assistance but is also whether MVHC can take the Trust into consideration in determining how to exercise its discretion as to which of the eligible applicants should receive a rental subsidy.
...

[54]         While S.A. may not have a vested interest in the Trust, she clearly has a beneficial interest. If she wishes to apply for a rental subsidy she must disclose the amount in the Trust.

[55]         MVHC, through the Assistance Application, requires applicants to provide information which MVHC considers to determine whether it will provide rental assistance. Applicants agree to provide such additional information as MVHC may require. In this case, MVHC says it requires further information about the Trust to determine both S.A.’s eligibility for rental assistance and, in the context of a program in which assistance is not available for all eligible applicants, whether S.A. should receive such assistance in preference to other eligible applicants.

[56]         I agree with the chambers judge’s analysis that the Trust is an asset of S.A. and that MVHC is entitled, pursuant to the provisions of the Assistance Application, to the further information it requested concerning the Trust to assist it in determining whether to provide rental assistance.

[57]         MVHC operates a subsidy program for persons in need. The Additional Rent Assistance program is discretionary based on a consideration of factors including financial factors and public housing needs. MVHC is entitled to know the particulars of the Trust so it can properly weigh S.A.’s rent assistance application against other eligible candidates. MVHC is entitled to know the respective financial positions of all applicants in determining how to spend its limited funds.
[58]         I find MVHC is entitled to require S.A., if she wishes to seek a rental subsidy, to provide the information requested regarding the Trust. This includes a statement showing the current balance of the trust fund along with details of all disbursements made since it was established.  Because S.A. has refused to provide the requested information, her application is incomplete.  As set out in the Assistance Application, MVHC will not process incomplete forms. Only when S.A. provides the requested information will MVHC have to decide whether to continue to extend her rental assistance.

Creating a discretionary trust for a beneficiary with disabilities in British Columbia is still a good way to provide for the beneficiary without affecting the provincial Persons with Disabilities Benefits, but may affect eligibility for other types of assistance. 

Significant Increase in Assets Exempton for Persons Receiving Brititsh Columbia Disability Benefits

Earlier this month the Ministry of Social Development and Social Innovation announced that a person receiving Persons with Disabilities benefits from the Government of British Columbia will be able to have funds of up to $100,000 without it affecting his or her eligibility to receive the benefits. Here is an excerpt from the press release:

Beginning Dec. 1, 2015, the amount of assets that people receiving disability assistance may hold without losing eligibility for assistance will rise to $100,000 for an individual with the Persons with Disabilities (PWD) designation, and $200,000 for a couple where both have PWD designation. Currently, the asset limits are $5,000 and $10,000 respectively.

And for the first time in B.C., persons with disabilities will be able to receive cash gifts with no effect on their eligibility for assistance. Under current policy, people receiving income and disability assistance can only receive one-time gifts without affecting their eligibility.

In the case of an inheritance, the higher asset limits will free up many clients from having to set aside that money in a trust.

For those of my clients making wills leaving a significant amount of money to a child or other beneficiary who is receiving Persons with Disabilities benefits in British Columbia, I will continue to suggest in many cases that they create a discretionary trust for the beneficiary, rather than an outright gift. First, if the amount exceeds the new limit, then a trust will still be necessary for the beneficiary to continue to be eligible for the benefits. Secondly, the rules may change in the future, and perhaps the exemption may be lowered again.

Supreme Court of Canada Holds Absolute Prohibition of Physician-assisted Dying Unconsitituional

In a unanimous decision released yesterday, in Carter v.Canada (Attorney General), 2015 SCC 5, the Supreme Court of Canada held “that the prohibition on physician-assisted dying is void insofar as it deprives a competent adult of such assistance where (1) the person affected clearly consents to the termination of life; and (2) the person has a grievous and irremediable medical condition (including an illness, disease or disability) that causes enduring suffering that is intolerable to the individual in the circumstances of his or her condition.” 

The Supreme Court of Canada suspended the declaration of invalidity for 12 months in order to give the federal and provincial governments time to regulate physician-assisted deaths.

The case was brought be several plaintiffs, including Gloria Taylor who “was diagnosed with a fatal neurodegenerative disease, amyotrophic lateral sclerosis (or ALS), which causes progressive muscle weakness.  ALS patients first lose the ability to use their hands and feet, then the ability to walk, chew, swallow, speak and, eventually, breathe.” She did not want to die a slow, painful, death, nor did she want to take her own life violently, while she was still physically capable of doing so, but before she wanted to die. She set out her wishes as follows: 

I do not want my life to end violently.  I do not want my mode of death to be traumatic for my family members.  I want the legal right to die peacefully, at the time of my own choosing, in the embrace of my family and friends.

I know that I am dying, but I am far from depressed.  I have some down time - that is part and parcel of the experience of knowing that you are terminal.  But there is still a lot of good in my life; there are still things, like special times with my granddaughter and family, that bring me extreme joy.  I will not waste any of my remaining time being depressed.  I intend to get every bit of happiness I can wring from what is left of my life so long as it remains a life of quality; but I do not want to live a life without quality.  There will come a point when I will know that enough is enough.  I cannot say precisely when that time will be.  It is not a question of “when I can’t walk” or “when I can’t talk.”  There is no pre‑set trigger moment.  I just know that, globally, there will be some point in time when I will be able to say – “this is it, this is the point where life is just not worthwhile.”  When that time comes, I want to be able to call my family together, tell them of my decision, say a dignified good‑bye and obtain final closure - for me and for them.

My present quality of life is impaired by the fact that I am unable to say for certain that I will have the right to ask for physician-assisted dying when that “enough is enough” moment arrives.  I live in apprehension that my death will be slow, difficult, unpleasant, painful, undignified and inconsistent with the values and principles I have tried to live by. . . .

[. . .]

 . . .  What I fear is a death that negates, as opposed to concludes, my life.  I do not want to die slowly, piece by piece.  I do not want to waste away unconscious in a hospital bed.  I do not want to die wracked with pain.

The Criminal Code of Canada prohibits a physician, or anyone else, from assisting a person to commit suicide. The key provisions are section 14 and section 241, which read as follows:

14. No person is entitled to consent to have death inflicted on him, and such consent does not affect the criminal responsibility of any person by whom death may be inflicted on the person by whom consent is given.

241. Every one who

(a) counsels a person to commit suicide, or

(b) aids or abets a person to commit suicide, whether suicide ensues or not, is guilty of an indictable offence and liable to imprisonment for a term not exceeding fourteen years.

Ms. Taylor, and the other plaintiffs, Lee Carter, Hollis Johnson, Dr. William Shoichet, and The British Columbia Civil Liberties Association brought a claim in the Supreme Court of British Columbia, challenging the prohibition on physician-assisted dying.

One of the difficulties the plaintiffs faced was that in 1993, the Supreme Court of Canada in a majority decision rejected a constitutional challenge to section 241(b) of the Criminal Code brought by a lady who also suffered from ALS. The decision is Rodriguezv. British Columbia (Attorney General), [1993] 3 S.C.R. 519. A decision of the Supreme Court of Canada is binding on all other Canadian courts.

Madam Justice Lynn Smith, in the Supreme Court of British Columbia held that it was open to her to reach a different conclusion than in Rodriguez for two reasons. First, in subsequent decisions, the Supreme Court of Canada modified the approach to be taken in determining whether a law offends a key provision, section 7, of the Canadian Charter of Rights and Freedoms. Secondly, there was a great deal more evidence about physician-assisted dying before her than had been available in Rodriguez, including evidence about regulations and safeguards from abuse in other jurisdictions that do permit physician-assisted dying, notably Washington and Oregon, Netherlands, Belgium, Switzerland, Luxembourg and Columbia.

After considering a great deal of evidence on physician-assisted dying, Madam Justice Smith held that the prohibitions were unconstitutional. Her reasons for judgment are at 2012 BCSC 886.

The majority of the British Columbia Court of Appeal (Chief Justice Finch dissenting) allowed the appeal, holding that Rodriguez was binding authority. The Court of Appeal decision is at 2013 BCCA 435.

The Supreme Court of Canada disagreed with the majority in the British Columbia Court of Appeal and held that it was open to Madam Justice Smith to reconsider Rodriguez because of the change in the Supreme Court of Canada’s conception of section 7 of the Charter, and also the difference in the evidence of the social and legislative facts before the Court in Carter.

The Supreme Court of Canada held that the prohibition violates section 7 of the Charter, which reads as follows:

Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

In analyzing section 7, the Court first considered whether the prohibition impinges “life, liberty and security of the person.” The second question is whether the impingement is “in accordance with the principles of fundamental judgment.”

The Supreme Court of Canada agreed with Madam Justice Smith that the prohibition impinges on life because it had the effect of forcing some people to take their own lives prematurely while they were still physically capable.

The Supreme Court of Canada also agreed that the prohibition on physician-assisted dying also limited liberty and security of the person:

[66]                          We agree with the trial judge.  An individual’s response to a grievous and irremediable medical condition is a matter critical to their dignity and autonomy.  The law allows people in this situation to request palliative sedation, refuse artificial nutrition and hydration, or request the removal of life-sustaining medical equipment, but denies them the right to request a physician’s assistance in dying.  This interferes with their ability to make decisions concerning their bodily integrity and medical care and thus trenches on liberty.  And, by leaving people like Ms. Taylor to endure intolerable suffering, it impinges on their security of the person.

Having found that the prohibition impinges life, liberty and security of the person, the Supreme Court of Canada then looked at whether it did so in accordance with the principles of fundamental justice. There are of course limitations on life, liberty and security of the person that are constitutional, as long as those limits are in accordance with the principles of fundamental justice.

The principles of fundamental justice require that “laws that impinge on life, liberty or security of the person must not be arbitrary, overbroad, or have consequences that are grossly disproportionate to their object.” The Supreme Court of Canada again agreed with Madam Justice Smith that the object of the prohibition on assisted dying was “to protect vulnerable persons from being induced to commit suicide at a time of weakness….”

In this case, the Supreme Court of Canada held that the prohibition, while not arbitrary, is overbroad. The question is whether the law “goes too far by denying the rights of some individuals in a way that bears no relation to the object….” The prohibition is overbroad in infringing on the rights of people who are not vulnerable.

[86]                          Applying this approach, we conclude that the prohibition on assisted dying is overbroad.  The object of the law, as discussed, is to protect vulnerable persons from being induced to commit suicide at a moment of weakness.  Canada conceded at trial that the law catches people outside this class:  “It is recognized that not every person who wishes to commit suicide is vulnerable, and that there may be people with disabilities who have a considered, rational and persistent wish to end their own lives” (trial reasons, at para. 1136).  The trial judge accepted that Ms. Taylor was such a person — competent, fully-informed, and free from coercion or duress (para. 16).  It follows that the limitation on their rights is in at least some cases not connected to the objective of protecting vulnerable persons.  The blanket prohibition sweeps conduct into its ambit that is unrelated to the law’s objective.

After the Court found that the prohibition infringed on section 7 of the Charter, the Supreme Court of Canada considered whether the prohibition was saved by section 1 of the Charter which reads:

The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.

The Court set out the tests as follows:

[94]                          In order to justify the infringement of the appellants’ s. 7  rights under s. 1  of the Charter , Canada must show that the law has a pressing and substantial object and that the means chosen are proportional to that object.  A law is proportionate if  (1) the means adopted are rationally connected to that objective; (2) it is minimally impairing of the right in question; and (3) there is proportionality between the deleterious and salutary effects of the law:  R. v. Oakes, [1986] 1 S.C.R. 103.

Although the prohibition is rationally connected to the object of protecting vulnerable persons from being induced to commit suicide at a time of weakness, the Supreme Court of Canada held that it failed the test of minimally impairing the rights to life, liberty and security of the person. The decision is based on Madam Justice Smith’s findings of facts that vulnerable persons could be protected without the need of an absolute prohibition on physician-assisted dying. I quote again from the Supreme Court of Canada decision:

[104]                      This question lies at the heart of this case and was the focus of much of the evidence at trial.  In assessing minimal impairment, the trial judge heard evidence from scientists, medical practitioners, and others who were familiar with end-of-life decision-making in Canada and abroad.  She also heard extensive evidence from each of the jurisdictions where physician-assisted dying is legal or regulated.  In the trial judge’s view, an absolute prohibition would have been necessary if the evidence showed that physicians were unable to reliably assess competence, voluntariness, and non-ambivalence in patients; that physicians fail to understand or apply the informed consent requirement for medical treatment; or if the evidence from permissive jurisdictions showed abuse of patients, carelessness, callousness, or a slippery slope, leading to the casual termination of life (paras. 1365-66).

[105]                      The trial judge, however, expressly rejected these possibilities.  After reviewing the evidence, she concluded that a permissive regime with properly designed and administered safeguards was capable of protecting vulnerable people from abuse and error.  While there are risks, to be sure, a carefully designed and managed system is capable of adequately addressing them:

My review of the evidence in this section, and in the preceding section on the experience in permissive jurisdictions, leads me to conclude that the risks inherent in permitting physician-assisted death can be identified and very substantially minimized through a carefully-designed system imposing stringent limits that are scrupulously monitored and enforced. [para. 883]

[106]                      The trial judge found that it was feasible for properly qualified and experienced physicians to reliably assess patient competence and voluntariness, and that coercion, undue influence, and ambivalence could all be reliably assessed as part of that process (paras. 795-98, 815, 837 and 843).  In reaching this conclusion, she particularly relied on the evidence on the application of the informed consent standard in other medical decision-making in Canada, including end-of-life decision-making (para. 1368).  She concluded that it would be possible for physicians to apply the informed consent standard to patients who seek assistance in dying, adding the caution that physicians should ensure that patients are properly informed of their diagnosis and prognosis and the range of available options for medical care, including palliative care interventions aimed at reducing pain and avoiding the loss of personal dignity (para. 831).

Twelve months from now, physician-assisted dying will be permitted in Canada for competent adults, who clearly consent, and “who have a grievous and irremediable medical condition … that causes enduring suffering that is intolerable to the individual in the circumstances of his or her condition.” 

Gloria Taylor passed away before the Supreme Court of Canada’s decision.

Report on Assisted Living in British Columbia

Yesterday, the British Columbia Law Institute and the Canadian Centre for Elder Law published a Report on Assisted Living in British Columbia.

As set out in their press release:

“The existing legal framework for assisted living was created in the very early stages of development of this form of housing in the province.  The Report on Assisted Living in British Columbia offers solutions to the legal and jurisdictional gaps in that framework.  It is based on lengthy and detailed deliberations by a very knowledgeable and experienced committee representing a cross-section of the different interests concerned with assisted living,” said Jim Emmerton, Executive Director of BCLI / CCEL. 

The Assisted Living Reform Project Committee that developed the recommendations in the report included representatives from residents’ and tenants’ advocacy organizations, private providers of assisted living, BC Housing,  a regional health authority, the Office of the Ombudsperson, as well as distinguished lawyers practising in the elder law field. 

Assisted living is a form of rental housing where meals, light housekeeping, and certain personal care services are provided to residents in addition to accommodation.  It is intended for seniors and persons with disabilities who require some personal services, but not 24-hour care. 

While the number of assisted living dwelling units in B.C.  has increased greatly over the past decade,  the respective rights and obligations of residents and operators of assisted living facilities remain uncertain in many areas.  The BCLI / CCEL report contains reform recommendations to address these deficiencies in the existing framework, which were also identified and criticized in the Ombudsperson’s comprehensive report on seniors’ care in B.C. issued in 2012.

The BCLI / CCEL report was preceded by a consultation paper that sought input from stakeholders on proposals for improvement and refinement of the framework.  The recommendations in the report issued today were made after detailed consideration of the responses to the consultation paper from assisted living residents and their families, private and public providers of assisted living, care sector workers, and other stakeholders as well as the general public

Changes to Ministry of Social Development Policy Now Allows Up To $200,000 in Non-Discretionary Trust

The British Columbia Ministry of Social Development changed its policy to allow a person receiving disability assistance to place up to $200,000 in a non-discretionary trust effective October 1, 2012. This is an increase from $100,000.

Provincial disability benefits are means tested. If a person who meets the criteria for a Person with Disabilities, that person may receive disability assistance if his or her income and assets are below certain levels. In determining a person’s assets, there are assets that are exempt. An interest in a non-discretionary trust is exempt if the assets in the trust do not exceed $200,000. The former limit was $100,000. There is no limit for assets held in a discretionary trust.

The terms “discretionary” and “non-discretionary” trusts are defined in the policy:

Discretionary trust
A trust in which the trustee has absolute authority over payments of capital and income from the trust. 

Non-Discretionary Trust
A trust in which the trustee does not have absolute authority over payments of capital and income from the trust.  The beneficiary may have some control, or the trustee may be required to make certain payments.

The Ministry has made a number of other changes. According to the announcement made October 1, 2012:

Some of the key changes that take effect today include:

• A $200 monthly earnings exemption for all expected-to-work clients to give employable individuals a chance to build job skills and experience, take advantage of short-term or temporary work, and better provide for their families while receiving assistance.

• An $800 monthly earnings exemption for individuals receiving disability assistance.

• An exemption of income tax refunds so individuals and families on income and disability assistance will be able to keep their full income tax refund without it affecting their benefits.

• Restoring a number of medically necessary medical equipment and supplies for clients on income and disability assistance, including ventilator supplies, bariatric scooters, orthoses and apnea monitors.

• Access to dental services for children of families on hardship assistance so parents can take their children in for regular dental checkups.

• An extension of income assistance to parents without legal status in Canada who are fleeing abuse and can't leave the country with their children.

Further changes will come into effect next year, including: 

• Mandatory income tax filing rules for those on income and disability assistance - which comes into effect in spring 2013 - will ensure individuals and families are getting all the tax credits they are entitled to. Appropriate exemptions will be in place to protect anyone who may be exposed to risk, such as fleeing an abusive partner.

• Annualized earnings exemptions for individuals on disability assistance will provide the flexibility to calculate earnings on an annual basis, so that individuals with disabilities can maximize their earnings during times when they are feeling healthy and able to work.

Federal Budget Allows Rollovers from RRSPs to RDSPs

Today's Canadian Federal Budget has a proposal to allow for income tax to be deferred on the death of a Registered Retirement Savings Plan annuitant if the funds are paid to Registered Disability Savings Plan for the annuitant's financially dependant child or grandchild. The measure is explained in the Budget here as follows:

When the annuitant under a Registered Retirement Savings Plan (RRSP) dies, the existing income tax rules generally provide that the value of the RRSP is included in computing the deceased's income for the year of death. However, preferential tax treatment is provided on RRSP distributions made after death to the deceased's surviving spouse or common-law partner, or to children or grandchildren who were financially dependent on the deceased RRSP annuitant. There are two aspects to this preferential tax treatment.

•Distributions of the RRSP proceeds to the deceased's surviving spouse or common-law partner, or to a financially dependent child or grandchild, reduce the amount of the deceased's income and are included in the income of the recipient (these distributions are referred to as "refunds of premiums").
•If a spouse or common-law partner, or a child or grandchild who was dependent on the deceased annuitant because of physical or mental infirmity, receives a refund of premiums, an offsetting deduction allows the refund of premiums to be transferred on a tax-deferred (or "rollover") basis to the RRSP of the recipient, or used to purchase an immediate life annuity.
Similar rules also apply in respect of Registered Retirement Income Fund (RRIF) proceeds and certain lump-sum amounts paid from Registered Pension Plans (RPPs). For the purposes of this supplementary information, "RRSP proceeds" also refers to RRIF and lump-sum RPP proceeds and "RRSP annuitant" also refers to a RRIF annuitant and an RPP member.

Registered Disability Savings Plans (RDSPs) were introduced in Budget 2007 to help parents and others save for the long-term financial security of a child with a severe disability. An RDSP is a tax-assisted savings vehicle in which investment income accumulates tax-free. Canada Disability Savings Grants and Canada Disability Savings Bonds may also be paid by the government into the RDSP. Canada Disability Savings Grants, Canada Disability Savings Bonds and investment income are included in the beneficiary's income for tax purposes when paid out of the RDSP.

Budget 2010 proposes to extend the existing RRSP rollover rules to allow a rollover of a deceased individual's RRSP proceeds to the RDSP of a financially dependent infirm child or grandchild.

An individual who qualifies to be an RDSP beneficiary and who meets the age and residency requirements for RDSP contributions will be eligible to roll over RRSP proceeds received as a result of the death of their parent or grandparent to their RDSP if the requirements under the existing RRSP rollover rules are satisfied (that is, if the RDSP beneficiary was financially dependent on the deceased individual by reason of physical or mental infirmity). An infirm child or grandchild is generally considered to be financially dependent if the child's income for the year preceding the year of death did not exceed a specified threshold ($17,621 for 2010). An infirm child with income above this amount may also be considered to be financially dependent, but only if the dependency can be demonstrated based on the particular facts.

The amount of RRSP proceeds rolled over into an RDSP will not be permitted to exceed the beneficiary's available RDSP contribution room. The lifetime contribution limit for RDSPs is $200,000. The rolled-over proceeds will reduce the beneficiary's RDSP contribution room, but will not attract Canada Disability Savings Grants. These proceeds will be considered private contributions for the purpose of determining whether an RDSP is a primarily government-assisted plan (a plan where Canada Disability Savings Grants and Canada Disability Savings Bonds paid to the plan exceed private contributions made to the plan, and which is consequentially subject to a number of additional requirements). Since the amount of RRSP proceeds rolled over to an RDSP will not have been subject to income tax, the amount will form part of the portion of a disability assistance payment that is included in the beneficiary's income when withdrawn from the RDSP.

The RDSP beneficiary or his or her legal representative will be required to make an election in prescribed form to transfer the RRSP proceeds to the RDSP on a rollover basis. The election would be made at the time of the RDSP contribution and filed with both the Canada Revenue Agency and Human Resources and Skills Development Canada by the RDSP issuer.

These measures will be effective for deaths occurring on or after March 4, 2010.

Registered Disability Savings Plan Blog

I have found an excellent blog that deals with Registered Disability Savings Plans. The blog includes information about these plans, and updates on related provincial legislation concerning whether the savings will be considered assets for the purpose of entitlements to provincial disability benefits (each province has its own rules). The blog has links to related sites and a Registered Disability Savings Plan calculator.

You can check out the RDSP blog here.

British Columbia to Exempt Federal Registered Disability Plans When Calculating Eligibility for Provincial Disability Benefits

I wrote previously about the Federal Government's announcement in the 2007 budget to introduce Registered Disability Savings Plans ("RDSP"). These plans would allow families to contribute funds to a plan for a person with a disability. The plans allow the person with a disability to defer tax on the investment income inside the plan until he or she withdraws money. There are also matching Federal Government grants.

I wrote that

the effectiveness of this program will depend on how the various provinces treat the savings in the RDSP. For example, British Columbia's provincial disability benefits are means tested....If an RDSP, or payments from an RDSP, disqualify a person with a disability from receiving provincial disability benefits, the program will be of little or no benefit to the beneficiary.

The British Columbia Government issued a press release a couple of days ago stating that the Ministry of Employment and Income Assistance will exempt RDSPs when calculating a person's eligibility for British Columbia disability benefits. The RDSPs will not be considered in the asset test, and a person who is eligible for the provincial disability benefits may receive disbursements from an RDSP without losing any of the provincial benefits.

The press release is as follows:

The Ministry of Employment and Income Assistance will fully exempt the federal government’s Registered Disability Savings Plan when calculating clients’ eligibility for disability assistance.

British Columbians with disabilities who are eligible for the Government of Canada’s Disability Tax Credit and their families or legal guardians will be able to contribute up to a lifetime maximum of $200,000 (after tax dollars) to a Registered Disability Savings Plan before they turn 60.

The federal government has released details of proposed changes to legislation that would enable a national Registered Disability Savings Plan to be in place beginning in
2008.

The exemption by British Columbia’s Ministry of Employment and Income Assistance will allow clients and their families to keep disbursements from the Registered Disability Savings Plan on top of their regular disability assistance payments.

Further, British Columbia will exempt assets held in the Registered Disability Savings Plan when calculating clients’ eligibility for their monthly disability assistance.

The Registered Disability Savings Plan exemption is intended to encourage families and friends to save for the future needs of children and adults with severe disabilities. The exemption supports the government’s Disability Strategy and commitment to build the best system of support in Canada for persons with disabilities.

British Columbians who are eligible for the Government of Canada’s Disability Tax Credit but are not yet receiving it are encouraged to apply for it now so that they will be eligible for the new Registered Disability Savings Plan when introduced.

Referrals to Other Professionals

Yesterday, while I was speaking about estate planning to a group of people at the Seniors Safety Fair, one lady put up her hand, and spoke about her experiences in trying to have a will prepared for her. She said she has a disabled child who receives disability benefits. When she phoned one law firm, someone asked her if her estate was worth over $500,000. When she said “no,” the law firm advised her to get a stationer’s-form will kit.

She then went to a notary public. She said that the notary public advised her that if she left anything to the disabled child, the child would lose the disability benefits. This lady was left with the impression that she shouldn’t leave anything to the disabled child.

Even allowing for the possibility that there was a misunderstanding, I am concerned about the advice this lady apparently got. Advising a client, or prospective client, with a disabled child to do her own will, or to cut out the child from any inheritance is terrible advice.

She needs to retain a lawyer who does estate planning work. There are ways to provide benefits for a disabled child, without jeopardizing B.C. disability benefits, including using a discretionary trust in the will. (I have written about this issue here.) But, no stationer’s-form will is going to contain the clauses necessary to create the discretionary trust.

I have no idea what law firm this lady phoned. I would hazard a guess that she contacted a law firm that does not do a great deal of estate planning work, and is probably not that interested in this kind of work. I don’t have a problem with lawyers turning a way work they are not interested in doing. But, why not refer people who need legal assistance to another lawyer? There are plenty of us who do estate planning for people with assets of less than $500,000.

Similarly, it would be appropriate in these circumstances for the notary public to refer the client to an estate-planning lawyer. In British Columbia, a notary public is permitted to draw some types of wills, but not wills with discretionary trusts. In this case, the notary public apparently recognized that a simple will leaving an outright gift to the disabled child would jeopardize the disability benefits. But, he or she did not go the next step, and refer the client to someone who could assist.

It is good business, as well as good client service, for professionals to make referrals to other professionals. By taking the time to refer a client or prospective client to another lawyer who does the type of work the client needs, you make a good impression on the person you are dealing with. You are sending out a signal that you care, even if you do not take on the work. He or she may come back to you in the future for the type of work you do. Furthermore, referrals out, tend to generate referrals back.

I don’t give specific advice at these seminars, but I did talk briefly about trusts for disabled children, and gave her a copy of my article on this topic.

Registered Disability Savings Plan

I think the most interesting program in today's Canadian Federal Government budget is the Registered Disability Savings Plan ("RDSP"). Beginning in 2008, a parent of a child with a disability may contribute to a RDSP for the child. There is no tax deduction for the contributions, but there are some matching grants from the Federal Government. You will be able to accumulate income inside the RDSP tax free. The person with a disability pays tax when benefits are paid out from the RDSP.

A person with a disability can also contribute to his or her own RDSP. It appears that, in addition to parents, other family members may contribute as well, but it is not clear to me from reading the budget if anyone can contribute, or if there are restrictions on who can contribute.

I expect that this program will work well for those families who can afford to put some funds away for a person with a disability.

For very low income families, the Federal Government will contribute up to $1000 per year to an RDSP without requiring matching contributions.

Before I reproduce part of the budget dealing with RDSPs, I have a couple of caveats. First, the criteria for the disability tax credit requires a "severe and prolonged mental or physical impairment." The tests may be quite stringent, and not all people with disabilities will qualify. See Canada Revenue Agency's Interpretation Bulletin "IT-519R2 (Consolidated)."

Secondly, the effectiveness of this program will depend on how the various provinces treat the savings in the RDSP. For example, British Columbia's provincial disability benefits are means tested. (I have written a previous post on this issue here.) If an RDSP, or payments from an RDSP, disqualify a person with a disability from receiving provincial disability benefits, the program will be of little or no benefit to the beneficiary.

The following is an excerpt from the Annex 5 Tax Measures: Supplementary Information and Notices of Ways and Means Motions, of the 2007 Federal Budget:

Registered Disability Savings Plan

To help parents and others save for the long-term financial security of a child with a severe disability, Budget 2007 proposes to introduce a new Registered Disability Savings Plan (RDSP) with a Canada Disability Savings Grant (CDSG) program and Canada Disability Savings Bond (CDSB) program. The RDSP will be based generally on the existing Registered Education Savings Plan (RESP) design, as recommended by the Expert Panel on Financial Security for Children with Severe Disabilities.

The main design elements of the RDSP are described below. Further technical details will be provided when legislation is brought forward. Certain design details and administrative mechanisms will be developed in consultation with financial institutions. The Government will work with financial institutions to put the necessary administrative mechanisms (for example, for paying CDSGs and CDSBs to RDSPs) in place to allow financial institutions to begin offering RDSPs to Canadians as soon as possible in 2008. Individuals establishing an RDSP in 2008 will be eligible for a full year’s CDSG and CDSB entitlement.

Eligibility

Generally, any person eligible for the disability tax credit (DTC) and resident in Canada, or their parent or other legal representative, will be eligible to establish an RDSP. The DTC-eligible individual will be the plan beneficiary. The Social Insurance Number of the beneficiary, and of the parent or other legal representative, will be required in order to establish the plan. These requirements must be met when the plan is established and whenever a contribution is made to the plan or a CDSG or CDSB is paid to the plan.

Tax Treatment

Contributions to an RDSP will not be deductible. The investment income on contributions, CDSGs and CDSBs will accrue tax-free. Contributions will not be included in income for tax purposes when paid out of an RDSP. CDSGs, CDSBs, and investment income earned in the plan will be included in the beneficiary’s income for tax purposes when paid out of an RDSP.

Contributions

Contributions to an RDSP will be limited to a lifetime maximum of $200,000 in respect of the beneficiary, with no annual limit. There will be no restriction on who can contribute to the plan. Contributions will be permitted until the end of the year in which the beneficiary attains 59 years of age.

Canada Disability Savings Grants (CDSGs)

To provide additional direct government assistance to help ensure the future financial security of a child with a severe disability, RDSP contributions made in a year will qualify for CDSGs at matching rates of 100, 200 or 300 per cent, depending on family net income and the amount contributed. Table A5.2 sets out the specific matching rates that will apply to annual contributions, by family net income
level.

Table A5.2

Canada Disability Savings Grant (CDSG)Matching Rates on Contributions
Family Net Income ($)
[Table provides that for income of up to 74,357, the grants are 300% for the first $500, and 200% on the next $1000. For those with incomes of over 74,357 the grant is 100% on the first $1000.]

The family net income threshold shown in Table A5.2 is in 2007 dollars. This threshold will be indexed to inflation for 2008, when RDSPs become operational,
and for subsequent taxation years. Family net income will generally be determined in the same manner as for the Canada Education Savings Grant, except that, for years after the year in which the beneficiary attains 18 years of age, the relevant income will be that of the beneficiary and their spouse or common-law partner.

There will be a lifetime limit of $70,000 on CDSGs paid in respect of an RDSP beneficiary. An RDSP will be eligible to receive CDSGs until the end of the year in which the beneficiary attains 49 years of age.

Canada Disability Savings Bonds (CDSBs)

To ensure that RDSPs help promote the future financial security of children with a severe disability in lower-income families, CDSBs of up to $1,000 will be paid annually to the RDSPs of low and modest-income beneficiaries and families. CDSBs will not be contingent on contributions to an RDSP.

The maximum $1,000 CDSB will be paid to an RDSP where family net income does not exceed $20,883. The CDSB will be phased out gradually for those with family net income between $20,883 and $37,178. These income thresholds are in 2007 dollars and will be indexed to inflation for 2008, when RDSPs become operational, and for subsequent taxation years. Family net income will be determined in the same manner as for the CDSG.

There will be a lifetime limit of $20,000 on CDSBs paid in respect of an RDSP beneficiary. An RDSP will be eligible to receive CDSBs until the end of the year in which the beneficiary attains 49 years of age.

Payments

Payments from an RDSP will be required to commence by the end of the year in which the beneficiary attains 60 years of age.

Payments from an RDSP will be subject to a maximum annual limit determined by reference to the life expectancy of the beneficiary and the fair market value of the
property of the plan, consistent with the Expert Panel’s proposals.

In addition, the beneficiary of an RDSP, or the beneficiary’s legal representative,
will be permitted to encroach on the capital and income of the plan, in such amounts and for such purposes as the plan may provide.

To ensure that RDSP contributions, CDSGs and CDSBs are used to support the beneficiary, only the beneficiary or the beneficiary’s legal representative will be permitted to receive payments from the RDSP. Contributors will not be entitled to receive a refund of contributions.

Repayments of CDSGs and CDSBs

There will be a requirement for an RDSP to repay to the government all CDSGs and CDSBs (and associated investment income) paid to the plan in the ten years preceding a payment from the plan, upon the cessation of the beneficiary’s eligibility for the DTC or the death of the beneficiary.

Death or Cessation of Disability

Where the beneficiary of an RDSP either ceases to be eligible for the DTC or dies, the funds in the RDSP (net of repayments as described above) will be required to be paid to the beneficiary or pass to the beneficiary’s estate. That amount (net of contributions) will be included in the income of the Beneficiary for tax purposes.

Treatment of the RDSP for Means-Tested Benefits

Budget 2007 proposes that amounts paid out of an RDSP will not be taken into account for the purposes of calculating income-tested benefits delivered through the income tax system. In addition, RDSP payments will not reduce Old Age Security or Employment Insurance benefits.

Provinces and territories provide income support for persons with disabilities through means-tested programs. The Expert Panel noted that, for the RDSP program to be effective, RDSP assets should not disqualify a plan beneficiary from receiving provincial or territorial income support provided to persons with disabilities.

The Expert Panel also noted that income payments from the plan should supplement—not reduce—income support provided under these programs at least
until the level of income support plus RDSP payments exceeds the Low Income Cut
Off (LICO) for the province or territory.

The Minister of Human Resources and Social Development, in collaboration with the Minister of Finance, will work with the provinces and territories to ensure that the RDSP is an effective savings vehicle to improve the financial security and well-being of children with severe disabilities.

Plan Institute's "Cross Canada Reaching Out Tour"

I received an email from Seniors Outreach forwarding to me information about Plan Institute's filmscreening of The Ties That Bind, and a workshop in Kelowna as part of its "Cross Canada Reaching Out Tour." The filmscreening is at 7:30 p.m. on October 26, and the workshop is at 9:30 a.m. on October 27, 2006. Both events are at the Rotary Centre for the Arts. You can register online here. According to the Plan Institute website,

From Newfoundland to British Columbia, there will be public screenings of the National Film Board documentary The Ties That Bind, coupled with the film are workshops that offer inspiration and the practical tools needed to plan for the future. From will and estate planning to creating enduring social networks, this is a chance to hear personal stories, engage in lively dialogue, and learn steps you can take today. Workshop facilitators include Vickie Cammack, Executive Director of PLAN Institute and recipient of a Meritorious Service Medal from the Governor General.

What is Plan Institute? I looked up their mission on their website. It says,

It is our mission to reduce the isolation and loneliness of people with disabilities and ensure that the gifts and contributions of all members of a community are encouraged and welcomed.

Through policy reform, leadership development, social entrepreneurship, social network facilitation and dialogue, our work is focused on connecting people, ideas and action.

It sounds interesting. Here is the complete tour:

Date Host City Registration
Oct 7 Fredericton, NB email jrichard@nabcl.ca
Oct 14 Ottawa, ON email lno@lifetimenetworksottawa.ca
Oct 14 Medicine Hat, AB email p.wagner@redi.ca
Oct 19 Edmonton, AB email lilymannarion@yahoo.ca
Oct 21 Lethbridge, AB email laclplan@shaw.ca
Oct 20/21 Regina, SK email racl@sasktel.net
Oct 26 Vernon, BC email provisionresources@shaw.ca
Oct 27/28 Kelowna, BC *** Register Online ***
Oct 27/28 Thunder Bay, ON *** Register Online ***
Nov 3/4 Chatham, ON email mary-ann@getintocommunityliving.com
Nov 4 Medicine Hat, AB email p.wagner@redi.ca
Nov 4 Montreal, PQ *** Register Online ***
Nov 4 Seattle, Washington email life.span@verizon.net
Nov 17/18 St. John's, NF email nlacl@nf.aibn.com
Nov 24/25 Peterborough, ON email bgallman@distibutel.net
Nov 25 Prince George, BC *** Register Online ***
Nov 30 Burnaby, BC email tanya.sather@gobaci.com
Dec 2 Calgary, AB *** Register Online ***

Canadian Federal Budget Includes Modest Benefits to Seniors and Families with Disabled Children

Today's budget included an increase in the amount seniors can claim under the pension income credit from $1000 to $2000.

I liked what Finance Minister Jim Flaherty said about helping families with children with disabilities:

• Canadians value compassion, respect and inclusiveness. In support of those values, effective July 1st, this government is increasing the maximum annual Child Disability Benefit from $2,044 to $2,300.
• We are also extending this benefit so that more families can qualify.
• We are increasing the maximum amount of the refundable medical expense supplement to $1,000 from $767 for the 2006 taxation year. This supplement improves work incentives for Canadians with disabilities by helping to offset the loss of coverage for medical and disability-related expenses under social assistance when recipients move into the labour force.

Also Mr. Speaker, parents and grandparents of a child with severe disabilities face an important consideration. They need to find a way to secure their child’s long-term financial security when they are no longer able to provide support.
• This government will appoint a small group of experts to examine ways we can help to ease this concern.

On the big ticket tax cuts, this budget represents a triumph of politics over good economics and social policy. The one percent cut in the Goods and Services Tax is politically popular--and no, I am not giving my share of this back. But, the government is increasing taxes on the lowest tax bracket from 15% to 15.5%. The previous Liberal government's cut from 16% to 15% gave all taxpayers an income tax cut, but assisted low income earners the most. A cut in income tax provides greater incentives to work and invest than the cut in consumption taxes. That's my two cents plus GST worth on this topic.

You can read the budget speech here.

Taxation of Registered Retirement Savings Plans at Death

A registered retirement savings plan (“RRSP”) is a retirement plan that allows taxpayers in Canada to defer tax on savings until retirement. Contributions to RRSPs are tax deductible. Tax on interest, dividends and capital gains on investments in an RRSP is deferred. When the taxpayer takes funds out of the RRSP, he or she then pays taxes on the amount withdrawn each year. You can contribute to your own RRSP or to your spouse’s plan or common law partner’s plan.

What are the tax consequences when the person entitled to an RRSP (the “annuitant”) dies?

The basic rule—to which there are some important exceptions—is that the annuitant is deemed to have received the value of the RRSP at death, and the value is then included in the annuitant’s income in his or her terminal return for the year of death. This can result in very large income taxes in the year of death.

There are some exceptions.

If the annuitant designated a spouse or common law partner (for a definition click here) as the beneficiary of the RRSP, then in the case of a matured RRSP, the spouse or common law partner becomes the successor annuitant and pays the tax as he or she receives payments from the plan. A matured plan is a plan that is paying retirement income. In this case, the estate does not have to pay the tax.

If the plan is unmatured (not yet paying retirement income), and the annuitant designates a spouse or common law partner as the beneficiary, then the spouse or common law partner may elect to transfer the RRSP into his or her own RRSP, Registered Retirement Savings Plan, or qualified annuity, and pay tax when he or she receives payments. Again, the effect is that the estate does not have to pay taxes on the RRSP for the deceased’s year of death.

What if the annuitant designates his or her estate, as the beneficiary of an RRSP, but the annuitant’s spouse or common law partner is a beneficiary of the estate? In that case, the annuitant’s executor or administrator may be able to jointly elect with the spouse or common law partner to have the same rules apply as if the annuitant had named the spouse or common law partner as a beneficiary of the RRSP.

The Income Tax Act, Canada, has similar rules that allow tax to be deferred on an RRSP for beneficiaries who are the annuitant’s financially dependant children or grandchildren. In the case of a child or grandchild who is under 18, an annuity to age 18 may be purchased with the proceeds of the RRSP. Tax is then deferred until the years in which the child receives annuity payments.

In the case of a child or grandchild who is dependant by reason of a physical or mental infirmity (whether over or under 18), the proceeds of an RRSP may be transferred into the child or grandchild’s RRSP, Registered Retirement Income Fund, or annuity.

It is important to keep in mind that if you designate someone other than a spouse, common law partner, or financially dependant child or grandchild as a beneficiary of an RRSP, the tax burden of the RRSP will fall on your estate, rather than on the beneficiary. This may not be important if your RRSP beneficiary is the same person as the beneficiary in your will. But if you are naming others as the beneficiaries in your will, you may be leaving them less than you think, unless you take into account the fact that their share will be reduced to the extent that your estate bears the tax burden in respect of your RRSP.

I have one more exception to point out in this post—which I admit already has too many exceptions. Although the tax burden in respect of an RRSP may fall on the estate, if there are insufficient funds in an estate to pay the taxes, Canada Revenue Agency may collect the tax from the beneficiary of the RRSP.

For more information, see Canada Revenue Agency’s "Death of an RRSP Annuitant" here, and Interpretation Bulletin IT-500R "Registered Retirement Savings Plans -- Death of an Annuitant" here.

B.C. Government Increases Earnings Exemptions for People with Disabilities

The British Columbia ministry of Employment and Income Assistance has recently increased the amount that people with disabilities receiving income assistance in British Columbia may earn before they lose any of their benefits. According to the Ministry's press release issued last week:

Beginning March 1, 2006, income assistance clients receiving Persons with Disabilities or Persons with Persistent Multiple Barriers support will be able to earn up to $500 each month in addition to receiving their full shelter and support payment from the government, Employment and Income Assistance Minister Claude Richmond announced today.

Today's announcement meets government's commitment to raise the earnings exemption for these clients and marks the third increase since 2001, when the exemption for Persons with Disabilities was $200 per month. The latest increase to the earnings exemption for Persons with Disabilities clients brings it from $400 to $500 per month - a 150 per cent increase overall. This follows government's decision early last year to increase disability assistance by $70 to $856 a month - the highest rate increase in B.C.'s history, providing the third highest rate of assistance available in Canada for persons with disabilities.

The full press release is here.

The announcement is an improvement, but even for those who can earn an additional $500 per month, it would still be pretty tough to get by in British Columbia on $1356 per month total income.

I have previously written about using trusts to provide for disabled beneficiaries here.

Inheritances and British Columbia Disability Benefits

A person may be eligible for provincial disability benefits if he or she has a severe mental or physical impairment that is likely to continue for at least two years and restricts that person’s ability to perform daily living activities. The benefits are means tested. In other words, if the disabled person’s assets or other income exceed a certain amount, then he or she will not be eligible to receive disability benefits.

Where a disabled person who is receiving disability benefits receives an inheritance, or personal injury settlement, the funds he or she receives may jeopardize his or her eligibility to receive the disability benefits. The effect may be that the funds that the disabled beneficiary receives from the inheritance or settlement may simply be used to replace the disability benefits, and the disabled person will receive no real financial benefit from the funds.

The Employment and Assistance for Persons with Disabilities Act, S.B.C. 2002, c. 41 and the Regulations, do allow a disabled person to own certain assets without losing his or her disability benefits. For example, a disabled person may own his or her own residence, and still qualify for benefits.

The Regulations also provide that up to $100,000 may be held in a trust for the disabled person [the amounts have increased since I wrote this post, see my update here]. The trust funds may then be used for his or her disability related expenses, without affecting his or her eligibility to receive disability benefits. This amount may be increased with the approval of the Minister of Employment and Income Assistance.

The funds held in trust may be used for such expenses as medical aids, caregiver services, education, renovations to and maintenance of the person’s residence to accommodate the disabled person’s needs.

Estate planning lawyers will often recommend to people who wish to provide for disabled beneficiaries, that instead of leaving money outright in their Wills to the disabled beneficiaries, they create trusts for the disabled beneficiaries. If drawn appropriately, it may be possible to set up a trust with more than $100,000 for a disabled beneficiary without affecting the beneficiary’s eligibility for disability benefits.

But what happens if a disabled beneficiary is left funds outright, instead of through a trust? Or what if the disabled person receives a lump sum person injury settlement? If the disabled beneficiary refuses to accept the payment, or gives it away, the legislation provides that he or she will be penalized, and he or she may lose the disability benefits.

Fortunately, government policy allows the disabled person to transfer an inheritance or personal injury settlement into a trust for himself or herself to pay disability related expenses. This is set out in the Ministry of Employment and Income Assistance information brochure "Disability Assistance and Trusts." The disabled person may lose the benefits for the month he or she receives the funds, but would still be eligible for disability benefits in future months.

However, if you have a disabled beneficiary, it will likely be preferable if you set up a trust in your Will for the beneficiary. The government policy allowing the beneficiary to transfer funds into a trust is not set out in legislation, and could be changed very quickly. Furthermore, other problems could arise. For example the disabled beneficiary could have creditors who would be entitled to look to the inheritance if it is left outright to the beneficiary to satisfy their claims.

[I updated this post on March 11, 2007, and again in March 2017.]