Estate Planning Considerations for Parents of Children With Disabilities

Parents of children with disabilities are often so focused on day-to-day care and support that they struggle to find time to plan for their child’s future.

It is overwhelming to think about what will happen when you die: Who will provide care and support for your child? Planning for the inevitable is essential to ensuring your child’s future is stable and financially secure. Here are five things to consider as the parent of a child with disabilities, when creating an estate plan:

1. A basic will is not enough

A simple will is not going to cut it. Even if your assets are straightforward, the situation is not.

When you have a beneficiary with a disability, there are important considerations you will need to address in your will, whether your child is a minor or an adult when you die. If they are—or are likely to be—incapable of managing their own money, it is essential that you incorporate trust provisions. A trust is a legal relationship that allows a person you choose (called the trustee) to manage your child’s money, and to use it to meet their needs.

There are many ways to structure a trust, and it is critically important that you choose the right one. This is especially true if your child is receiving government benefits like the Ontario Disability Support Program (ODSP) or might in the future. A will without a trust, or with one that is poorly drafted, can affect the valuable benefits for which your child may qualify.

You also need to consider the amount of financial support your child may need to maintain their quality of life. If you have more than one child, this might mean leaving a larger share of your estate to the one with greater financial needs. If you don’t adequately provide for a child who is financially dependent, this may cause unnecessary litigation after your death.

It is essential to speak with a lawyer with expertise in disability planning to ensure nothing is overlooked.

2. Beneficiary designations matter

There may appear be good reasons to name your child as a beneficiary of assets such as a pension, a life insurance policy or a registered account (such as an RRSP, RRIF or TFSA). However, if the beneficiary designation is not structured properly, it could jeopardize your child’s eligibility for government benefits. It also might direct the money into your child’s hands instead of to the person assigned to manage the funds on their behalf. These problems are difficult and costly to address after your death. You can avoid them with careful, coordinated planning.

3. Consider substitute decision making for your child

If your child is—or is likely to be—incapable of managing money that is held in their own name and they cannot make a power of attorney for property, you need to consider how those funds will be handled after you die. You may informally assist your child with this now, but who will step in when you’re not there?

There are certain types of benefits that allow someone to assist an adult with a disability in managing the benefits without needing them to have a power of attorney for property or be acting as a guardian. If this is possible, you should determine who will take on this role and how you can prepare them in advance.

In some cases, a guardianship application is the best option. If your child has money of their own that cannot be managed informally after your death or if you act as your child’s guardian of property, you will need to consider who will do that in your place. You can include wishes in your will about who should act as your child’s guardian. It is helpful to permit the costs of a guardianship application, which can be burdensome, to be paid from your child’s share of your estate.

4. Where will your child live and will it be affordable?

If you plan to leave real estate to your child to live in after your death, how will the carrying costs be paid?

While ownership of the property itself may not have a negative impact on their benefits if it is their principal residence, you may be shocked to discover that payments made from a trust that relate to general maintenance, upkeep, and carrying costs of a property may affect benefits, such as ODSP.

There may be exceptions if these payments relate to necessary disability-related services or renovations, but don’t assume that unlimited payments can be made to your child for expenses such as mortgage payments, property tax, renovations or utilities, without any effect.

Without proper planning, a gift of real estate may cause significant headaches in preserving eligibility for government benefits. Ultimately, the property may need to be sold, which would create additional challenges.

5. Consider who will care for your child and how

While the substance of your estate plan will focus on finances, you should also consider who will be providing support to your child in other ways. For example, if your plan is for your child to move in with an adult sibling after your death, have you considered contributions to the sibling’s housing costs? If you expect the sibling to provide care, should there be compensation? How will your trustee pay for items or services your child needs? What types of private support services might be needed? If your child has established relationships with private support services or healthcare professionals, who are they?

Many of these questions can be addressed in a well-drafted trust. Others can be covered in a separate letter stored with your will and amended from time to time. A letter outlining your wishes is an excellent tool. It can describe how you have supported your child and provide personal and informal guidance to help maintain a similar quality of life after your death.

Estate planning for parents of children with disabilities is complex and deeply personal. The right plan depends on the needs and abilities of your child, your support system, and the nature of your assets. With good advice, you can structure a plan that will give you peace of mind, knowing your child’s personal and financial needs will be met, even after your death.

Need help with your estate plan? Schedule a consultation with one of our lawyers to discuss the best way to secure and protect your family’s future.