For many disabled people in Alberta, the Assured Income for the Several Handicapped (AISH) program offers much-needed financial support.
Traditionally, however, receiving help under the AISH program has often complicated estate planning matters for many people who care for disabled people.
How could they adequately plan the care of disabled children, siblings, spouses or other family members who rely on them without jeopardizing the assistance received through AISH?
Estate planning usually required specialist assistance and strategic planning to take into account the AISH legislation and ensure adequate provisions were made for disabled dependents. There were often doubts about whether leaving an inheritance could compromise the governmental support received by an AISH-eligible person or his/her partner.
Bill 5, which passed in June 2018, made it easier to make such provisions in estate plans without such concerns, particularly with respect to trusts and inheritances.
The legislation is known as an Act to Strengthen Financial Security for Persons with Disabilities, and here’s what you need to know about it…
What is Assured Income for Severely Handicapped (AISH)?
Assured Income for Severely Handicapped (AISH) was established in 1979 to help meet the needs of severely disabled Albertans.
The Government of Alberta provides financial and health benefits for eligible residents with a permanent medical condition that prevents them from earning a living.
People in such positions often require considerable help from family members and, traditionally, looking after their needs when estate planning has presented serious challenges.
Who is eligible for AISH?
Eligibility for AISH support depends on:
- Meeting the medical considerations for support
- Meeting the financial considerations for support
Among the financial considerations is that the applicant and his/her spouse or adult interdependent partner (AIP) must not exceed the level of income or assets allowed by the AISH program ($100,000).
What are the changes to AISH for trusts and inheritance?
With Bill 5, new provisions provided more options when planning an estate to ensure that a loved one’s long-term financial security was not jeopardized after a will-maker’s passing.
The bill ensured that the right to AISH support from the Alberta government was not impacted if certain limits and restrictions were followed when estate planning.
Before the implementation of Bill 5, most trusts were considered non-exempt assets in Alberta. This also included assets held in trust for a recipient’s spouse.
Alberta excluded Henson trusts — a type of discretionary trust commonly set up for individuals who receive government disability benefits — from asset calculations.
Often, this meant that people with disabilities who were the beneficiaries of trusts became ineligible to receive AISH in Alberta — even if funds or assets were never transferred to them.
Under the current AISH legislation, the total of any non-exempt assets cannot exceed $100,000 but certain assets are considered exempt and do not affect AISH eligibility. These assets include those held in trust for the AISH recipient, as well as the following assets:
- A principal residence
- An automobile
- Certain types of long-term investment accounts
- Some other selected types of assets
Generally, the best plan to care for the needs of a disabled loved one involves setting up a trust. There are no limits to the amount of money or other assets that can be held in the trust.
An alternative would be a Registered Disability Savings Plan (RDSP) but there are eligibility requirements for these.
With a trust, the testator (will-maker) names an individual or individuals as trustees of estate funds that are held and invested for the benefit of the AISH recipient.
There is great flexibility with trusts in Alberta and it’s usually best to take legal advice from a seasoned wills and trusts lawyer before setting one up.
With the right advice, trusts can be established with certain conditions and powers of discretion that ensure that the distributions made comply with AISH legislation and do not jeopardize the assistance received by the disabled individual. Trusts can also be designed with the flexibility to be amended as future legislation or the needs of the disabled individual change.
The other main change under Bill 5 allowed people with disabilities or their cohabitating partner a grace period to move funds that they receive as an inheritance (or financial gift) to their exempt assets (such as a trust). They’re now allowed a one-year period to receive the right financial planning advice after the receipt of an inheritance —important “breathing space” to make informed financial decisions with peace of mind.
Is income from trusts affected by Bill 5?
Bear in mind that although the assets in trusts are classed as exempt, the treatment of income from trusts has not changed under Bill 5.
AISH considers income paid from a trust as only partially exempt income. So, if a disabled individual receives income from a trust, it can decrease AISH benefits or eliminate them (if the income exceeds the allowable threshold).
Should I change my estate plan for Bill 5?
Since Bill 5 came into being, family members have had greater freedom and peace of mind to incorporate Henson trusts in their estate planning for beneficiaries entitled to AISH benefits — without concerns about their eligibility to receive benefits.
It has allowed disabled beneficiaries to receive both inheritances and ongoing government support in Alberta.
Estate plans should, however, be flexible as the financial fortunes of will-makers can change over time as well as the legislation that affects inheritances.
It’s always a good idea to review your estate plan with a qualified estate planning lawyer, who can advise you whether you are still on target to accomplish your wishes. If not, it’s generally relatively simple to make the required amendments.
We currently have three offices across Alberta — Edmonton, Calgary, and Red Deer. However, we serve the entire province of Alberta. We also have the infrastructure to work with any of our clients virtually — even the furthest regions of Alberta.
We also have a dedicated intake form to help you get the ball rolling. Our intake team will review your specific case and advise you on the next steps to take as well as what to expect moving forward.
Our offices are generally open 8:30 a.m.—4:30 p.m., Mon—Fri.
WILLS and ESTATES LAWYER
Sarah Levine is a lawyer in the firm’s Edmonton office. She carries on a varied practice, focusing on all forms of estate planning and estate administration.