- A discretionary trust is not treated as an asset for BC disability assistance if the person has no way of collapsing it and gaining control of the assets.
- A non-discretionary trust counts as an asset, and is exempt only where the amount contributed does not exceed $200,000.
- Assets in a Registered Disability Savings Plan (RDSP) are exempt for BC disability assistance.
If you want to leave money to a family member with a disability, a common worry is that a direct inheritance could reduce or end their provincial disability benefits. A trust is one way families try to give support without handing over a lump sum.
The rules depend on how the trust is built and who controls it. This article explains how British Columbia treats different kinds of trusts and RDSPs for disability assistance, so you can ask better questions before you plan.
This article covers the law of British Columbia.
Why the type of trust matters
Disability assistance in British Columbia looks at what a person owns. Money left outright to the person can count as an asset. A trust can change that, but only if it is structured so the person cannot simply take the money out.
A trust that you create in your will is generally called a testamentary trust, because it is created on and as a result of a death. The trustee you name then manages the money for the beneficiary.
Discretionary and non-discretionary trusts
In a discretionary trust, the trustee decides if, when and how much to pay. In a non-discretionary trust, the beneficiary has a fixed entitlement. The ministry treats them differently.
| Type of trust | Treatment for BC disability assistance |
|---|---|
| Discretionary trust | Not treated as an asset if the person has no way of collapsing it and gaining control of the assets |
| Non-discretionary trust | Counts as an asset, but is exempt only where the amount contributed does not exceed $200,000 |
The $200,000 figure comes from ministry booklet guidance, and the ministry's policy pages can differ in how they describe trusts. Confirm the current rule before you rely on it.
Registered Disability Savings Plans
An RDSP is a separate tool. Assets held in an RDSP are exempt for BC disability assistance, and RDSP payments are exempt as income and assets.
If money is received so that it can be moved into a trust or an RDSP, it is temporarily exempt for up to three months, with the first month being the month received. The ministry may extend this month by month if the delay is beyond the person's control and reasonable efforts are shown. That is a short window, so a plan for the transfer should be ready in advance.
Choosing and guiding the trustee
A discretionary trust depends heavily on the trustee. When investing trust property, a trustee must use the care, skill, diligence and judgment that a prudent investor would use. A trustee may delegate investment authority to an agent to the degree a prudent investor could, but must set the objectives and act prudently in choosing and monitoring the agent.
A trustee may invest trust property in any form of property or security in which a prudent investor might invest, but this does not authorize investing in a manner inconsistent with the trust. A trustee is not liable for an investment loss if the conduct conformed to a prudent plan or strategy with reasonable assessment of risk and return. The court may also relieve a trustee from liability for a breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused.
Executors and testamentary trustees must generally obtain a court order passing their first accounts within 2 years of the grant or appointment. That requirement does not apply if all beneficiaries approve the accounts in writing, or if the court directs otherwise. On notice from a beneficiary, a trustee must pass accounts annually. For a beneficiary who may need help understanding accounts, think about who can act for them.
A trustee or executor may receive a fair and reasonable allowance not exceeding 5% of the gross aggregate value of the estate. These allowance rules do not apply where the trust instrument sets the trustee's allowance. If you want to set that yourself, this is something to raise when the trust is drafted.
- Pick a trustee who is willing to say no as well as yes.
- Name a back-up trustee.
- Write down your wishes for how the money should support the person, such as housing, therapy or equipment.
What to do next
- List what you expect to leave and in what form.
- Find out whether your family member receives disability assistance and what they are allowed to hold.
- Ask whether a discretionary trust, an RDSP or both fit your situation.
- Choose a trustee and a back-up, and talk to them first.
- Confirm the current ministry rules and any tax effects with a lawyer or accountant.
Because the ministry's treatment turns on the trust's wording and the person's circumstances, a lawyer can review the draft before it is signed.
Frequently asked questions
Will an inheritance affect my family member's disability benefits?
It can. A non-discretionary trust counts as an asset and is exempt only where the amount contributed does not exceed $200,000. A discretionary trust is not treated as an asset if the person has no way of collapsing it and gaining control of the assets.
Are RDSP funds counted as assets?
No. Assets in an RDSP are exempt for BC disability assistance, and RDSP payments are exempt as income and assets.
How long can money wait before going into a trust or RDSP?
Assets received for transfer into a trust or RDSP are temporarily exempt for up to three months, counting the month received. The ministry may extend this month by month if the delay is beyond the person's control and reasonable efforts are shown.
Can the trustee hire someone to invest the money?
Generally yes, to the degree a prudent investor could under ordinary business practice. The exception is where the trust requires the trustee to act personally.
Sources
- Trustee Act, BC Laws — bclaws.gov.bc.ca
- CRA – Types of trusts — canada.ca
- gov.bc.ca – BCEA Policy and Procedure Manual: Trusts — www2.gov.bc.ca
- gov.bc.ca – Disability Assistance and Trusts booklet — www2.gov.bc.ca
- gov.bc.ca – BCEA Policy: Assets and Exemptions — www2.gov.bc.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
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