ODSP Inheritance Rules in Ontario: Asset Limits and Exemptions

If you receive Ontario Disability Support Program (ODSP) benefits and a family member has died, an inheritance can bring both relief and worry. ODSP looks at your income and your assets, so a sum of money arriving all at once can matter a great deal.

This article explains the asset limits, how an inheritance is counted, which exemptions exist, and what to do when you learn money is coming your way.

The ODSP asset limits

ODSP sets a ceiling on what you can own. The limits are $40,000 for a single person, $50,000 for a couple, and $500 for each dependant other than a spouse.

Some things do not count toward the limit. ODSP exempt assets include a principal residence, one motor vehicle regardless of value, and all funds held in a Registered Disability Savings Plan (RDSP). These figures can be changed, so confirm the current ones with ODSP before relying on them.

How an inheritance is counted

ODSP generally treats inherited money as income in the month you receive it, and any amount left over the following month as an asset. You are expected to report inheritances you receive or expect to receive.

There is a allowance that softens this. 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.

Notice that the $10,000 is one combined total. A gift from a friend, a life insurance payout and an inheritance all draw from the same allowance over the same 12 months.

Exemptions that can protect an inheritance

If an inheritance or life insurance payout is placed in a trust, up to $100,000 of that trust is an exempt asset. That cap also counts the cash surrender value of any 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 treated differently. ODSP does not count it as an asset, 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.

Money paid out of a trust can still matter. Payments are exempt as income when used for these purposes:

• approved disability-related items or services
• disability-related education or training
• a principal residence
• an exempt vehicle
• first and last month's rent

Other withdrawals are exempt only up to $10,000 in a 12-month period, and anything beyond that counts as income in the month received.

How long can you keep the money?

There is no comfortable waiting period for cash in your own hands. The money is generally income in the month you receive it, and what remains the next month is treated as an asset. Whether your benefits are affected then depends on your amounts compared with the asset limits.

The only extra time mentioned is for trusts: recipients may be given up to six months to set one up. The $10,000 allowance runs over a 12-month period, not as a delay. Do not assume you have a grace period. Ask ODSP and get advice before the money arrives if you can.

Tax is a separate question. The CRA lists most gifts and inheritances as amounts that are not reported or taxed for the person who receives them, but that does not change how ODSP counts the money.

What to do next

• Report the inheritance to ODSP, including money you only expect to receive.
• Ask the estate trustee for the amount and the expected timing in writing.
• Add up everything you own and compare it with your asset limit.
• Keep records of any gifts or insurance payouts in the last 12 months, since they share the $10,000 allowance.
• Talk to a lawyer before the money is paid if a trust might fit your situation.
• Be wary of anyone asking for a fee to release an inheritance, which is a warning sign of fraud.

Every situation differs, especially for couples and families with dependants. A lawyer can confirm how the rules apply to you.

Frequently asked questions