- Inheritances up to $10,000 per family member in a 12-month period are exempt as income for ODSP, and larger amounts count as income in the month received.
- Non-exempt assets are limited to $40,000 for a single person and $50,000 for a couple.
- A Henson (absolute discretionary) trust has no asset limit, but the recipient cannot place their own inheritance into one.
- All inheritances received or expected must be reported to the caseworker.
If you or a family member receives Ontario Disability Support Program (ODSP) benefits, an inheritance can be welcome news and a worry at the same time. Money that arrives in the wrong form can reduce or stop support, and it can leave a person with less than before.
This article explains in general terms how ODSP treats an inheritance and the trust tools that families and estate trustees often discuss. The numbers can change and whether a particular trust qualifies is a decision for the caseworker and ODSP, so confirm current details with a lawyer before acting.
How ODSP treats an inheritance as income
A cash inheritance received directly is income in the month received unless it is exempt. Inheritances up to $10,000 per family member in a 12-month period are exempt as income. Amounts above that count as income in the month received, and any money left over the next month is treated as an asset.
So the income problem and the asset problem are linked. A large inheritance can reduce that month's benefit, and what remains afterwards can then push the person over the asset limit. All inheritances received or expected must be reported to the caseworker. That includes money you have been told is coming but has not yet arrived, for example while an estate is still being administered.
The asset limits
ODSP limits the assets a person can hold. The regulation sets a base of $40,000, plus $10,000 if there is a spouse in the benefit unit, plus $500 per dependant other than a spouse. ODSP's eligibility information describes this as $40,000 for a single person and $50,000 for a couple. A principal residence and a motor vehicle are exempt assets.
| Item | How it is generally treated |
|---|---|
| Inheritance up to $10,000 per family member in 12 months | Exempt as income |
| Inheritance above that amount | Counts as income in the month received; leftover money is an asset the next month |
| Single person's non-exempt assets | Limited to $40,000 |
| Couple's non-exempt assets | Limited to $50,000 |
| Principal residence and a motor vehicle | Exempt assets |
Trusts that may protect eligibility
One option is a trust that holds the inheritance instead of paying it to the person directly. The regulation exempts a person's beneficial interest in trust assets available for maintenance where the trust capital comes from an inheritance or life insurance proceeds. The combined exempt amount for these trusts and life insurance cash surrender values cannot exceed $100,000.
Trust payments up to $10,000 in a 12-month period are exempt as income, but the exemptions apply only if an annual report of all trust income and expenses is filed. If a person receives a cash inheritance directly, they may be given up to six months to place it in trust. Do not rely on that period without confirming it with the caseworker.
A Henson trust, also called an absolute discretionary trust, gives the trustee sole discretion over payments. It has no asset limit, so it can exceed $100,000. The recipient cannot place their own inheritance or entitled funds into such a trust to avoid having it counted as an asset. Because of that, families usually look at how the money is set up before it reaches the person, and a lawyer can explain what is possible in your situation.
Questions to settle before any money is paid
Whether a specific trust qualifies is decided by the caseworker and ODSP's legal services, and whether a clause in a will actually creates a Henson trust is a drafting question. A lawyer can read the document and tell you whether it is likely to work as intended.
If you are the estate trustee and a beneficiary receives ODSP, check this before distributing. Paying the share to the person directly could reduce their benefits. Consider asking the beneficiary, or their family, whether they have spoken with the caseworker, and consider delaying payment while the right structure is worked out. If the will does not set up a trust, speak to a lawyer about what options remain.
What to do next
- Tell the ODSP caseworker about any inheritance received or expected.
- Find out the amount, the timing and whether the will or trust already holds the money in trust.
- Add up the person's current assets against the $40,000 or $50,000 limit, remembering the home and a vehicle are exempt.
- Do not move the person's own inheritance into a Henson trust yourself, because it will not avoid asset counting.
- If a trust is in place, make sure the trustee files the annual report of trust income and expenses.
- Ask a lawyer to review the will or trust and the timing before any payment is made.
Frequently asked questions
Will a small inheritance affect ODSP?
Inheritances up to $10,000 per family member in a 12-month period are exempt as income. You must still report all inheritances received or expected to the caseworker.
What happens if the inheritance is more than $10,000?
Amounts above that count as income in the month received, and money left over the next month is treated as an asset. That can affect the benefit and eligibility, so speak to a lawyer before accepting a large payment directly.
Can I put my own inheritance into a Henson trust?
No. The recipient cannot place their own inheritance or entitled funds into such a trust to avoid having it counted as an asset.
Is there a limit on how much a Henson trust can hold?
A Henson trust gives the trustee sole discretion over payments and has no asset limit, so it can exceed $100,000. Other inheritance trusts are exempt only up to a combined $100,000 with life insurance cash surrender values.
Sources
- O. Reg. 222/98 under the Ontario Disability Support Program Act, 1997 (e-Laws) — Ontario e-Laws
- Ontario – ODSP Policy Directive 4.7 Funds held in trust — ontario.ca
- Ontario – ODSP eligibility for income support — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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