Bill 5, known as "An Act to Strengthen Financial Security for Persons with Disabilities," received Royal Assent in the Alberta Legislature on June 11, 2018, with changes being made retroactively to April 1, 2018. This act has amended legislation surrounding trusts and inheritances for persons with disabilities, specifically as it applies to eligibility for Assured Income for the Severely Handicapped (AISH). AISH is a program offered by the Government of Alberta that provides financial and health benefits for eligible Albertans that have a permanent medical condition that prevents them from earning a living. If you have a family member with a disability, these new provisions provide more options when planning for your loved one's long term financial security.
Who is eligible for AISH?
In order to be eligible for AISH, in addition to medical considerations, there are also financial considerations. The applicant and his or her spouse or common law partner must not have income or assets that are higher than the AISH program allows. Certain assets are considered exempt and do not affect AISH eligibility. The total of any non-exempt assets cannot exceed $100,000. Prior to the implementation of Bill 5, most trusts were considered to be non-exempt assets and persons with disabilities, who were the beneficiaries of a trust, would generally be ineligible to receive AISH.
What are the new changes to AISH?
A trust is now considered an exempt asset by the AISH program. The amount in the trust will not count towards the $100,000 asset limit and there is no limit to the amount of money that can be held in the trust. With that said, although a trust is now an exempt asset, the treatment of income from a trust has not changed. AISH still considers income paid from a trust as only partially exempt income. As a result income from a trust may decrease AISH benefits, or eliminate eligibility completely.
The second modification is that persons with disabilities, or their cohabitating partner, will be given a one year grace period to move funds that they receive as an inheritance, or financial gift, to their exempt assets such as a trust or, Registered Disability Savings Plan (RDSP), if eligible. This particular change in legislation, affords individuals or couples the time to engage in financial planning following the receipt of an inheritance. It also gives family members the peace of mind that they are able to leave an inheritance without compromising the benefits of an AISH eligible person or his or her partner.
How can we help?
These changes are a welcome development for families that want to provide more certainty for the financial security of a disabled family member. If you have a family member with a disability, it is prudent to review the options available. Whether it's determining if someone with a trust may now qualify for AISH, or whether a trust should now be set up for someone receiving AISH, to discuss the setting up of an RDSP, or just to review previous planning, an ATB Wealth Financial Advisor can help you find the right solution.
The information provided is a simplified general summary. Family property and estate issues are complex and professional tax and legal advice should always be obtained.