ODSP Inheritance Reporting Rules in Ontario: What to Tell Your Caseworker

If you receive ODSP and a relative has died, you may be worried that an inheritance could put your benefits at risk. That worry is reasonable, because ODSP treats money and assets in particular ways.

This article explains in plain language what ODSP generally says about inheritances, when to speak up, and what options exist. Limits can change, so confirm current figures with your caseworker and get legal advice before you accept or spend a large amount.

The duty to report

ODSP recipients must report inheritances they receive or expect to receive. The word expect matters. You may need to say something before the money arrives, for example once you learn you are a beneficiary in an estate. Estates can take time, and you should not wait until the cheque is in your account.

An inheritance can affect your benefits, because ODSP generally treats inherited money as income in the month it is received, and amounts above the $10,000 limit generally count as income too. The consequences of failing to report can be serious, and they depend on the facts, so a lawyer can explain them if you are worried about something already received.

How an inheritance is counted

ODSP generally treats inherited money as income in the month it is received, and any amount left over in the following month as an asset. Each person in the benefit unit can receive a total of up to $10,000 in a 12-month period from gifts, voluntary payments, trust and life insurance payouts and inheritances. Amounts above that generally count as income in the month received.

These figures can be changed, so check the current ones before you rely on them.

Using a trust

Some people protect an inheritance by having it held in trust. Up to $100,000 of a trust funded from an inheritance or life insurance proceeds is an exempt asset, and that cap also counts the cash surrender value of life policies owned by the benefit unit. Recipients may be given up to six months to set up the trust.

A true absolute discretionary trust, often called a Henson trust, is not counted as an asset by ODSP, so its capital may exceed $100,000. The trustee has sole discretion over payments and no duty to pay for the beneficiary's living costs. Because the trustee holds that discretion, how the trust is written and run matters, so it is worth confirming the details with a lawyer.

Payments out of an ODSP trust are exempt as income when used for approved disability-related items or services, disability-related education or training, a principal residence, an exempt vehicle, or first and last month's rent. Otherwise they are exempt only up to $10,000 in a 12-month period, and other withdrawals count as income in the month received.

Other kinds of inheritance

• Life insurance proceeds are covered by the $10,000 rule above.
• A registered plan such as an RRSP or RRIF may carry tax, and that can reduce what you actually receive.
• A TFSA beneficiary does not pay tax on amounts up to the plan's value at death, but earnings after death are taxable.
• Most inheritances are not taxed for the person receiving them.

Tax treatment and ODSP treatment are separate questions. An amount can be tax-free and still count under ODSP.

What to do next

• Tell your caseworker about the inheritance you have received or expect to receive, and keep a record of what you say and send.
• Ask what the estate trustee expects to pay you and when.
• Ask how the money will be counted before you spend or move it, since ODSP generally treats inherited money as income in the month it is received.
• Ask a lawyer whether a trust makes sense, and how soon you must set it up.
• Keep bank statements, estate letters and anything you send to ODSP.

If the estate is large or complicated, a lawyer can also speak with the estate trustee about how your share is paid.

Frequently asked questions