Resources for Caregivers
Financial Resources and Planning
A diagnosis or onset of psychosis can be a scary realization for any family. Recognizing that your loved one may never be able to fully support themselves and need perpetual financial assistance is a daunting reality. We’ve compiled some resources from our caregivers to give you a foundation to consider and build from for your own loved one.
Relevant Government Programs
Many people experiencing serious and persistent mental health disorders are unable to earn a living due to disability. Direct income support for those who qualify is available from the Federal Canada Pension Plan Disability Benefit, or from the Disability Assistance program of the Province of British Columbia.
In addition, friends or family of an individual with a mental illness may wish to contribute to the Federal Registered Disability Savings Plan to ensure the loved one’s financial comfort in later years. This requires that the individual be assessed for extent of disability and found to qualify for the Federal Disability Tax Credit. With eligibility for the tax credit established, family or friends may contribute to the Disability Savings Plan and see their contributions matched or exceeded by the Federal Government.
There is also a potential benefit for a family member who cares for the individual approved for the Disability Tax credit. If the person with the disability pays little or no tax they may opt to transfer the tax credit to their caregiver.
Looking to the future, the federal government’s proposed Bill C-22, the Canada Disability Benefit Act, would offer an additional benefit to persons with disabilities. Introduced in the House of Commons in June 2022 this is currently under discussion with the provinces to ensure harmony between the income support programs of both levels of government.
Parents, or other family members of a disabled (due to serious mental illness) individual receiving provincial Disability Assistance are faced with a difficult decision when making a will. If they bequeath funds in the will to go to a disabled family member it may result in that individual being disqualified from provincial benefits. If this is likely to happen, then an Absolute Discretionary (Henson) Trust should be considered. The creation of such a Testamentary Trust allows for the transfer of financial assets, to be managed by a third party trustee, who will spend the funds for the benefit of the disabled family member. It ensures that the bequest will not be spent unwisely, or trigger the end of government benefits.
Canada Pension Plan Disability Benefit
This is a partial income replacement program for persons under 65 years whose disability (physical or mental) is long term and of indefinite duration, or likely to result in death.
There are two requirements for eligibility:
- The disabled individual must have contributed to the Canada Pension Plan (CPP) for four of the last six years with an annual contribution of $3,500 or more.
- They must demonstrate that the nature of their (mental health) disability prevents them from working regularly in any job.
Disability Assistance (BC)
This is an income support program for individuals who are designated as a Person with Disabilities under the BC Employment and Assistance Act. There is an application form to complete, both by the individual and their psychiatrist, family doctor, or nurse practitioner.
Unlike regular Assistance Benefits, disability assistance allows recipients to retain personal assets up to a value of $100,000, or $200,000 if the assets are in a Trust, without losing eligibility for benefits.
The current monthly benefit rate (April 2023) for a single individual in shared accommodation is as follows:
- Shelter/rent: $375
- Support: $983.50
- Transportation Supplement : $52
In addition, the person with the mental health disability can earn up to a maximum of $15,000 a year without it affecting their benefits.
The Employment and Income Assistance department will cover eligible drug costs, and some other essential medical services such as dental care.
Within Nanaimo, you can receive service in-person at 2100 Labieux Road.
Federal Disability Tax Credit
A tax credit is available to a disabled person, and can be transferred to their caregiver if living in the same household. To qualify, the disabled individual (e.g. with a severe and prolonged impairment in mental functions), needs to complete the Revenue Canada form T2201 with the help of their psychiatrist, family doctor or nurse practitioner. It is important to specify in the form if the tax credit is to be transferred to a caregiver in a higher income bracket. Once approved, the disability designation is valid for five years after which a new application may be required.
If approved for a federal disability tax credit the disabled individual automatically qualifies for a provincial disability tax credit.
Registered Disability Savings Plan (RDSP)
If approved for the Disability Tax Credit, the disabled person will be eligible for the Registered Disability Savings Plan if their income is modest. This is a savings plan for later years (60+).
The plan has two components – Bonds and Grants: the bond is a payment of up to $1,000 per year, for a maximum of 20 years ($20,000), to be paid into the RDSP. No contribution is required by the disabled individual or their family members.
The grant requires a contribution from the disabled individual or a family member(s). The maximum contribution for triggering the maximum federal government contribution is $1,500 per year, although more can be added if so desired. The federal government will then contribute up to $3,500 per year into the plan, to a maximum of $70,000 over the beneficiaries’ lifetime.
The disabled person’s income is taken into account in calculating both the bond and grant amount. In addition, the plan must be established before the disabled person turns 50 years of age.
It may also be advisable to speak with your bank or credit union as these institutions are approved to manage an RDSP.
NOTE: An application for federal disability status (in order to qualify for the tax credit and RDSP) is separate and distinct from an application for provincial disability status (to qualify for British Columbia’s Disability Assistance). Each process is guided by different legislation and administered by a different level of government. However, the province of BC may waive the assessment process for disability assistance if the disabled individual has already been approved for disability benefits under the federal Canada Pension Plan (CPP).
Absolute Discretionary (Henson) Trust
Trusts are a complicated topic. It may be beneficial to get legal advice before making any decision.
This section will focus on Trusts created by a will, therefore coming into effect after the death of an individual (usually a parent, grandparent, aunt or uncle). These are called Testamentary Trusts.
An Absolute Discretionary Trust, or Henson Trust (named after Leonard Henson who successfully fought the province of Ontario to have this type of trust recognized in 1989) aims to achieve two outcomes:
- To leave significant assets to be used for the benefit of a disabled person (usually a son or daughter) without giving them direct control over the funds.
- To prevent the will bequest from causing the disabled individual to be disqualified from receiving provincial Assistance.
There are drawbacks. A trustee must be found who will be competent, diligent and honest in the administration of the trust. Another family member, or members, are usually chosen, and it is best if they live in the same community as the trust beneficiary. If there are no obvious candidates most banks or large financial institutions will provide trustee services, but will charge a significant fee.
When preparing a will to include this kind of trust it is essential to consult a lawyer, and preferably one with a good understanding of estate planning for disabled persons. This is because the wording is extremely important, and it is unlikely that a Notary Public, or Internet Will application would have the required knowledge or insight.
Alternatively, assets can be transferred to a disabled individual through the establishment of a regular testamentary trust. In this situation the beneficiary could also be a trustee (alone or with others), but in either case would be deemed to have direct access to the funds. In British Columbia a recipient of Disability Assistance is allowed to have up to $200,000 in assets if in a trust (and up to $100,000 without a trust).
Regardless of which testamentary trust is chosen it is essential that the disabled recipient of disability assistance report the existence of the trust once it takes effect. The Ministry of Social Development and Poverty Reduction will need to be informed of any contributions or outlays from the trust.
One further point about testamentary trusts concerns their tax treatment by Revenue Canada. Trusts are taxed at the highest tax rate. The only way to receive more favorable tax treatment is to have the trust declared a “Qualified Disability Trust”. A precondition is for the trust beneficiary to qualify for the Federal Disability Tax credit.
Further Information on Testamentary Trusts:
You Are Not Alone
The journey of caring for your loved one can be tiring and difficult. You don’t need to walk the road alone. Join our support groups to find others who are walking a similar road as you.