Trusts For Disabled Beneficiaries
One of the more difficult areas of estate planning is providing
for a mentally or physically disabled beneficiary.
The Problem
In most situations a mentally or physically disabled beneficiary
is, if they are adults, the recipient of provincial disability benefits.
If someone who is receiving provincial funding receives a large capital
bequest the gift must be spent before they will again receive benefits.
Some assets such as a house or a car may be permitted.
As the whole point of providing for a person in a will is that you
are hoping that the person is actually benefited by your bequest
it does not make much sense to make a direct bequest to a person
receiving such benefits. If there is no will the same situation arises.
The Solution
The solution is to set up a discretionary trust within the will
or in a separate trust. A discretionary trust means that a trustee
would have discretion as to how much money would be spent on the
beneficiary. The beneficiary would not make these decisions. Normally
the trust would be set up so either the capital or the income could
be spent on the beneficiary. An example of where capital might be
used for the benefit of the beneficiary would be in the purchase
of a house or perhaps a car. Obviously in the case of a relatively
young beneficiary, the trustee would not want to waste the assets
of the trust within a few years. The object would be to make the
funds last for the lifetime of the beneficiary. In this way the beneficiary
can receive the benefit of additional funds for the rest of his or
her life.
Other Considerations
Normally it is suggested that the trustee for such a trust not be
a family member. This is because most discretionary trusts provide
that upon the death of the beneficiary there is a gift to other family
members. Obviously if the trustee is one of these family members
the trustee is in a conflict of interest position. Any funds that
are spent on the beneficiary would be funds that are not available
for the trustee or the trustee's family members upon the death of
the beneficiary. In such cases an independent trustee is named. Often
it is wise to appoint a trust company in these circumstances. It
may also be a good idea to appoint a trust company and a friend of
the family who knows the needs of the disabled person. The trust
company can look after the paper work and the friend can deal with
the personal needs of the beneficiary.
For more information on assisting disabled family members I would
recommend contacting the Planned Lifetime Advocacy Network (PLAN).
PLAN is a non-profit member-supported society that offers long term
planning advice for families of people with disabilities. PLAN helps
with wills and estate planning and building networks of support.
Phone (604) 439-9566. www.plan.ca.
Setting up a trust for a disabled beneficiary will take some time,
requires professional advice and is likely going to be more expensive
than a normal will. It is important that these matters be done correctly.
Proper planning will ultimately save your beneficiary money and provide
a better quality of life.
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