How to ensure dependents with disabilities are taken care of in a farm transition
Transition planning can be complex in many ways, but even more so when it involves a dependent with a disability.
Parents on the farm raising someone with a mental or physical disability are likely concerned about the financial well-being of those they care about after their own retirement and death, regardless of the dependent’s age. For these families, an important focus of financial and transition planning may be setting aside additional funds for the dependent while maintaining access to any available government benefit or support programs.
Planning is an investment that you make.
Kaylea Lax, a wills and estates lawyer and partner at Gerrard Rath Johnson LLP in Regina, Sask., recommends farm parents establish a team of advisors, including a lawyer and an accountant, and start the planning process as soon as possible.
“Planning is an investment that you make, and it can be so beneficial to your loved ones,” Lax says.
Here are four key steps to take in planning for the future care of a dependent experiencing a disability.
Lax’s initial planning or transition client discussions include a review of assets and liabilities and how they are structured and held. For farm families that include someone with a disability, any government assistance received as well as life insurance, pensions and benefits are important to note.
Canadian children approved for the disability tax credit (DTC) can establish a registered disability savings plan (RDSP). This long-term savings plan is a way for parents and others to save for the child’s future without paying tax on the earnings. Federal grants and bonds are also available, depending on family income and contributions to the plan.
Another way to provide funds to a child with a disability is through a trust. A Henson Trust is a common structure, set up with financial institutions specifically to give trustees full discretion on how to manage and distribute the funds. This type of trust cannot be considered a source of income or asset, which protects the beneficiary’s right to access support programs.
While the actual trust is most often created upon the death of the parents, the framework of a Henson Trust can be set up at any time, Lax explains.
She stresses the importance of consulting a lawyer with experience with this type of trust, as any errors in the documents could put the beneficiary’s government benefits at risk.
If farm parents with a dependent with a disability have not named an alternate guardian, Lax encourages them to do so in a will or through the court. If both parents die, this person will look after the dependent as a minor or dependent adult.
Setting up a trust involves appointing a trustee responsible for handling the asset. Naming an alternate subscriber to the RDSP or other accounts ensures access is automatically transferred upon death.
These roles may all be filled by the same person or by various people, but for simplicity’s sake, one caring, reliable person who is also skilled at financial management is recommended.
“It’s important to make sure you really trust the person you put in these roles,” Lax says. “The designation is about picking the person who is best for the job and can handle the administrative work, not about family pressure or preconceived notions.”
While financial planning is important for all families, Michael Lavis, CEO of Inclusion Regina, says estate, transition and end-of-life planning are critically important for families with a dependent who experiences a disability.
“Families that take the time to engage in these difficult planning conversations often feel a sense of relief in knowing that there are others in the circle of support that are now aware of their wishes,” he says.
Find a lawyer with experience setting up Henson Trust accounts.
Your dependent’s guardian after your death should be compassionate and trustworthy, as well as capable of managing finances.
Begin the conversation. This type of planning can be hard, but you will likely take comfort once you start the planning.
Article by: Rebecca Hannam