Canada: Big Changes To Gifts, Trusts, And Savings For ODSP Recipients

Last Updated: August 22 2018
Article by Kathryn Balter

Subsequent to the writing of this article, the Ford Government announced that the initiatives announced in Chapter 1, Section 7 of the previous government's 2018 Budget (which includes the New Regulation discussed in the article) will not proceed at this time. The Ford Government has stated that "[o]ver the next 100 days, Ontario will work on a plan to reform social assistance." In the meantime, ODSP recipients will receive a 1.5 per cent cost of living increase on September 1, 2018.

The author will further update her article following the 100 day period set out above. The press release from the Ford Government addressing these issues can be viewed here:

In the summer of 2017, several news sources reported changes to the Ontario Disability Support Program Act, 1997 (the "Act"), which subsequently came into force on September 1, 2017. For estates and trusts practitioners, the most significant changes were that:

  1. he basic cash exemption limits were increased from $5,000 for a single person and $7,500 for a spouse included with the person to $40,000 and $50,000, respectively; and
  2. ermissible payments from a trust fund, segregated fund, gifts and other voluntary payments were increased from $6,000 to $10,000 over a twelve-month period.

The reason that estates and trusts practitioners were interested in these changes is because we often find ourselves in the position of advising clients about how to provide for their children or other relatives who may now, or in the future, receive Ontario Disability Support Program (ODSP) benefits, which often results in the implementation of a Henson trust1.

Henson trusts are completely discretionary trusts, meaning that the trustees determine how much, if any, income and/or capital of the trust is paid to the beneficiaries2. A Henson trust may be established by Will (to be funded on death) or by deed (to be settled during one's lifetime) and is used to ensure that only those payments actually made to or for the discretionary beneficiary are included in such beneficiary's income and/or assets for the purpose of such person qualifying for certain benefits, including ODSP. The asset and income limits for individuals receiving ODSP benefits prior to September 1, 2017 were so low that clients struggled to determine whether it was worthwhile to preserve ODSP benefits with such serious constraints.

On April 18, 2018, a quiet change was made to the general regulation of the Act3. The impact of the change on individuals receiving ODSP is significant, but the new regulation made on April 18, 2018 and filed on April 20, 20184, appears to have no footprint in the news.

The most surprising change in this New Regulation is section 16(2), which states:

Paragraph 13 of subsection 43(1) of the Regulation is amended by striking out "up to a maximum of $10,000 for any 12-month period" at the end.

To clarify, paragraph 13 of subsection 43(1) of the Regulation currently reads as follows:

43. (1) The following shall not be included in income:


13. Payments in addition to a payment under paragraphs 1 to 12 that are payments from a trust or life insurance policy or gifts or other voluntary payments up to a maximum of $10,000 for any 12-month period.

As a result of the removal of the final words of paragraph 13, above, several other paragraphs relating to certain allowable gifts and voluntary payments are also being removed. These changes will mean that beneficiaries of a Henson trust, or any trust for that matter, may receive an unlimited sum of money. Furthermore, it means that all recipients of ODSP benefits may receive unlimited gifts and voluntary payments. Both of the above statements continue to be restricted by the asset limit of $40,000 or $50,000. This limit has not been amended by the New Regulation, but it now excludes registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs), giving ODSP recipients the ability to save for their futures even if they do not qualify for a disability tax credit5.

As long as income from trusts or voluntary payments are used for intangible items (such as vacations and other life experiences, like going to a Blue Jays game) or exempt assets, the New Regulation has loosened the constraints of providing very minor gifts or being limited to spending funds for disability-related expenses for those individuals receiving ODSP benefits. On the other hand, it is possible that this change will encourage the abuse of government resources by families who have sufficient assets to provide for their loved ones without accessing government benefits.

The section of the New Regulation dealing with income comes into force on November 1, 2018 and the section dealing with the exclusion of RRSPs and TFSAs comes into force on September 1, 2018.


1 Henson trusts are not a one-size-fits-all solution for all individuals wanting to leave funds to a person receiving ODSP benefits. There are many reasons not to use Henson trusts, including if there are sufficient funds to care for someone without accessing government benefits. Professional advice should be sought to determine the best course of action for each family.

2 See The Minister of Community and Social Services v Henson, [1978] OJ No 1121, aff'd [1989] OJ No 2093 (Ont CA).

3 O. Reg. 22/98 (the "Regulation").

4 O. Reg. 278/18, amending O. Reg. 22/98 (the "New Regulation").

5 Those ODSP recipients who qualify for a disability tax credit have the use of a tax-deferred vehicle called a Registered Disability Savings Plan (RDSP), which is already an exempt asset under the Regulation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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