Petley-Jones & Co Law Corporation

Ralph Petley-Jones

Nanaimo Lawyer

Ralph Petley-Jones  B.Comm.  LLB
5732 Hammond Bay Road, Nanaimo
British Columbia, Canada V9T 5N2
250 758.7370
fax 250 758.8703
 

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 through a Will, the gift must be spent before they will again receive benefits. Some assets such as a house or a car might be permitted.

Because 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 has discretion as to how much money is spent on the beneficiary. It can also 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 is the purchase of a house or perhaps a car. Obviously, in the case of a relatively young beneficiary the trustee does not want to waste the assets of the trust within a few years. The object is 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

Usually 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 are 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 might 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 paperwork and the friend can deal with the personal needs of the beneficiary.

For more information on assisting disabled family members we recommend contacting the Planned Lifetime Advocacy Network (PLAN) Tel: 604-439-9566. 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 as well as building networks of support.

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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