ODSP Asset Limit and Inheritance: How Much Can You Keep?

If you receive ODSP and a family member has died, an inheritance may be on the way. That can be welcome news, but money received outside the rules can reduce or stop your benefits, and sometimes lead to an overpayment you must repay.

This article explains the main ODSP asset and income rules that matter when you inherit, how a trust can change the outcome, and why reporting matters. Your circumstances will decide what applies, so get advice before the money arrives if you can.

The ODSP asset limits

ODSP looks at what you own as well as what you earn. The asset limits are set out in the table below.

An inheritance itself is generally not reported as taxable income to the Canada Revenue Agency, since most gifts and inheritances are on its list of amounts not reported or taxed, although income earned on them is taxable. That tax treatment is separate from ODSP, which has its own rules about what counts.

What is exempt

Some things do not count toward the limit. Exempt assets include the principal residence, one motor vehicle regardless of value, all RDSP funds, RESPs, pre-paid funerals and tools of the trade. If a principal residence is sold, the proceeds are exempt if used to buy another principal residence within 12 months.

Timing matters when you sell something. Selling an asset and not converting the proceeds within about six months can make the proceeds count as income and assets, which may result in cancellations and overpayments.

Inheritance, trusts and the $10,000 gift rule

How the money reaches you affects how it is treated. Inheritances or life insurance proceeds placed in trust for an ODSP member are exempt as an asset up to $100,000 combined with life insurance cash surrender value, and interest or dividends can be reinvested as long as capital stays at or below $100,000.

For income, an inheritance in trust under a will, up to $100,000 from an inheritance or life insurance payout, is exempt as income in the month received. Cash received and then placed in trust is income in the month received unless otherwise exempt, and becomes an exempt asset afterward if the trust is set up within six months.

Gifts and voluntary payments have a separate allowance. Each benefit-unit member may receive up to $10,000 in gifts or voluntary payments per 12-month period from any source, and payments from trusts, life insurance and windfalls count toward the same $10,000. Gifts used for disability-related items or services, a principal residence, an exempt vehicle, or first and last month's rent are exempt beyond that. Trust payments for disability-related items are exempt without limit, while other trust payments count toward the $10,000.

• Money left directly to you as cash is treated differently from money held in a trust under the will.
• Money received and then spent still has to be reported.
• Whether a trust is available depends on the will and the estate, so ask the estate trustee and a lawyer early.

How soon to report, and what if you are late

ODSP recipients must tell ODSP about any income or other money that they or their family receive, and must report new assets or changes in an asset's value. Reports can be made through MyBenefits, by phone or by mail. The best approach is to report as soon as you know an inheritance is coming or has arrived, rather than waiting.

Late reporting can cost you. If an inheritance is reported late and has partly been spent, the spending is reviewed, and amounts not covered by an exemption are charged as retroactive income for the month received. A repayable overpayment is money received that the person was not eligible to receive.

What to do next

• Ask the estate trustee what you are receiving, how much, and when.
• Do not spend, give away or move the money before you have advice.
• Ask a lawyer whether a trust can hold your share, and how it should be set up.
• If cash has already reached you, talk to a lawyer promptly about setting up a trust within six months.
• Report the inheritance to ODSP through MyBenefits, by phone or by mail.
• Keep records of what you received, what you spent and what it was for, especially disability-related items.
• Keep the $10,000 gift allowance in mind for the next 12 months.

Frequently asked questions