Parents of a child with a disability often worry about one question above all: what happens when we're gone? Three tools work well together.
1. The RDSP builds savings with government help
Up to $3,500 a year in grants and $1,000 a year in bonds, and Alberta's AISH treats the RDSP as an exempt asset and its payments as exempt income. See our RDSP guide.
2. A discretionary (Henson) trust holds an inheritance
Under AISH policy, assets held in a trust for a beneficiary are not counted toward the asset limit, though income paid out of the trust may affect the living allowance. The trust should give the trustee absolute discretion over payments. A lawyer should draft it, usually through your will.
3. Life insurance funds the trust
A permanent policy can name the trust (or your estate, directing funds to the trust through your will) so a tax-free death benefit arrives exactly when it's needed, regardless of how long you live. Parents and grandparents can also roll RRSPs or RRIFs into the child's RDSP on death, up to the $200,000 lifetime limit.
Things to get right
- Don't name a person receiving AISH directly as beneficiary without advice; a large lump sum paid directly could affect benefits.
- Choose a trustee you trust, plus a backup.
- Review the plan whenever AISH, ADAP or tax rules change.
Sources: Voice of Albertans with Disabilities (Henson trusts & AISH); Government of Alberta AISH eligibility; ESDC RDSP rules.
This article is general information, current as of its publication date, and is not personal financial, tax or legal advice.