Inheriting money can be a mixed blessing, even for those on ODSP.
Your mother passes away and, to add to the grief and stress, you find out she left you $95,000 in an inheritance. If you are receiving benefits from the Ontario Disability Support Program, you know you are not allowed to have more than $5,000 in assets. With an inheritance close to $100,000 your ODSP is seriously jeopardized. Not only could you lose the monthly income support you have come to rely upon, but also the health benefits it provides as well.
There isn’t a week that goes by where I don’t receive calls from people dealing with this situation. They are thankful for the money, but not if it costs them their ODSP benefits. What is worse, many have been told by their ODSP caseworkers they will lose their ODSP until they spend all the inheritance money. The worst calls are the ones who find me after they spent all the money.
There are options. You might be able to put your inheritance into a Registered Disability Savings Plan (RDSP), that is if you qualify for an RDSP. If you do have an RDSP, you can contribute up to $200,000 into it over your lifetime. Only problem is you may not be able to touch the money without penalties for many years to come. It can be very easy to put money into an RDSP; taking it out is an entirely different story.
You also have the option of putting up to $100,000 from an inheritance or a life insurance policy into a trust. This can be a really good option, especially for people on ODSP who do not have the capacity to manage their own money. A trust allows a third party trustee to manage the assets in the trust on behalf of the beneficiary who may have a developmental or intellectual disability.
A trust is less attractive if you are able to manage your own money, because you have to involve a trustee when you really just want to manage it on your own. On top of that, you may not want to swallow the legal fees you will need to cover to have the trust set up in the first place.
A lesser known solution is opening a segregated fund account. Segregated funds are sold exclusively by insurance companies and, to make a long story short, people are allowed to have as much as $100,000 in segregated funds without affecting their ODSP eligibility. Not only will a segregated fund account protect your ODSP, it will also cost you far less to set it up than a trust and you can access the money at your discretion, unlike the RDSP.
Simply because you are on ODSP, does not mean you have to spend down an inheritance to maintain your benefits.