Trusts and Estate Stuff – Legal Questions and Answers
By Halldor K. Bjarnason, Lawyer (PLAN Family Partner)
- I am receiving PWD, what kinds of expenses can be covered by my trust without affecting my monthly disability benefits?
The disability benefits regulations (under Section 12) outline specific categories of permissible trust expenditures. In a nutshell, the trust can spend unlimited amounts on the beneficiary’s medical expenses, caregiving expenses, education expenses, and if the beneficiary is not living in a care facility, maintenance and repairs to their primary residence. The trust can also spend up to $5484 per year on “costs to promote independence”. This latter category is not defined, but it basically covers anything, except for basic food and shelter, that doesn’t fit into the other categories and that the trustee(s) believe will improve the beneficiary’s life. It can include such things as new clothes, trips, hobbies, sports events, meals out, and automobile insurance.
There are a few commonly held myths about trust expenditures:
a) The Ministry needs to approve expenditures. Wrong! That’s the job of the trustee(s). While the Ministry has the right to veto expenditures, this rarely happens. . . and when it does, there’s an efficient appeal process.
b) Expenditures need to be reported to the Ministry each month. Wrong! The beneficiary must produce information about trust expenditures upon the request of the Ministry. While this is typically done during the beneficiary’s annual financial review, the Ministry can request information whenever it wants. However, there is no automatic reporting requirement if the trust expenditures are within the permitted categories. Ultimately, if the trustee stays in the habit of keeping good trust records, ready for inspection at any time, there is rarely a problem.
c) Trust expenditures are restricted to $5484 per year. Wrong! Trust expenditures related to promoting independence are limited to $5484 per year, but the medical, caregiving, education, and primary residence maintenance categories are all unlimited.
d) The Trust can give the Beneficiary $500 cash each month. Wrong! A person on benefits can “earn” $500 per month without affecting their benefits, but this amount can only come from legitimate employment. The Regulations specifically define cash from a trust as “unearned income”. Unearned income must be reported each month, and the Ministry deducts it dollar-for-dollar from the following months’ benefits cheque.
- If I’m receiving PWD, can I receive cash from my trust?
Under the Disability Assistance Regulations, money from a trust is specifically defined as “unearned income”. As unearned income must be reported to the Ministry immediately, and is deducted dollar-for-dollar from the following month’s assistance cheque, cash paid from a trust does not provide any benefit to the beneficiary. People often confuse the allowable $500 per month “earned income” exemption with money from a trust. Earned income is very narrowly defined as money earned from employment or volunteer work, and does not include disbursements from a trust.
While cash cannot be paid from a trust, there are often ways to accomplish indirectly what can’t be done directly. For example, suppose the goal is to give the beneficiary an extra $300 per month. Paying cash from the trust will not work. However, suppose the beneficiary is currently paying $300 per month in telephone, internet, and cable-television charges from her own pocket. There is nothing preventing the trust from paying for those services through the allowable “Promoting Independence” category of expenditures. In this example, the trust has absorbed $300 of the beneficiary’s personal expenses, which in turn, places an additional $300 in the beneficiary’s pocket each month.
By looking at the “bigger picture”, a creative trustee can often find ways, within the rules, to use the trust funds to legitimately help the beneficiary. . . without paying cash.
Please note that this column is provided for general information only. As specific facts affect how the law is applied to your circumstances, it is always wise to get the advice of competent legal counsel.
I always welcome questions to be included in future columns. Please email them to me at: Halldor@Trustlawyers.ca.