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.]