Estate Planning: New & Noteworthy

Siblings may now manage an RDSP for a beneficiary who is not capable of being their own plan holder

The federal government has extended a measure allowing qualifying family members to open an RDSP for an adult beneficiary who does not have capacity to contract, and who does not have a guardian or attorney for property. The temporary measure was set to expire at the end of 2023 and is now extended to December 31, 2026.

The government has also broadened the definition of “qualifying family member” to include not only a parent, spouse or common law partner of the RDSP beneficiary, but also an adult sibling of the beneficiary.

While the measure does not go far enough in ensuring access to the RDSP for people with disabilities, this is a step in the right direction and presents families with additional planning options, short of guardianship.

Recent Amendment to the Income Tax Act Extends Principal Residence Exemption to Beneficiaries of Inter Vivos Trusts

On June 22, 2023, Bill C-47 received royal assent and made important updates to the Income Tax Act. Most notably for people with disabilities and their families, the definition of “principal residence” was expanded to allow for beneficiaries of inter vivos trusts to benefit from the principal residence exemption (“PRE”).

This is a welcome change. It means that a home in an inter vivos trust for the benefit of an eligible person with disabilities will not be subject to capital gains tax upon its eventual sale or deemed disposition, as long as it was the beneficiary’s “principal residence.”

The amendment allows for the retroactive application of the PRE to relevant trusts, beginning in the 2017 taxation year.

There are several benefits of holding a home in trust for a person with disabilities:

  • The home would be kept and managed for their benefit, without ownership impacting the beneficiary’s ODSP entitlements.
  • Where part of the home is rented out to generate additional income, any such income would belong to the trust and not the beneficiary. This protects ODSP entitlements.
  • On the sale of the home, the proceeds would belong to the trust, and not the beneficiary, so the beneficiary’s ODSP entitlements would be unaffected by the sale.
  • The trust document can name multiple trustees along with alternate trustees to ensure continuity of care and support throughout the beneficiary’s life.
  • The beneficiary can now claim the PRE upon the eventual sale and/or deemed disposition of the home.

PooranLaw will continue to monitor the ongoing legal developments related to people with disabilities. If you require legal assistance, we encourage you to reach out to your regular PooranLaw lawyer, or any member of our team.

Note: This article provides general information only and does not constitute, and should not be relied upon as, legal advice or opinion. PooranLaw Professional Corporation holds the copyright to this article and its contents may not be copied or reproduced in any form, in whole or in part, without the express permission of PooranLaw Professional Corporation.