If you have a family member who receives Ontario Disability Support Program (“ODSP”) benefits, you may already be thinking carefully about their future. What happens to their housing, their care, their day-to-day support when you are no longer here? These are not easy questions, but they are exactly the right ones to be asking, and estate planning is a key part of the answer.
What many families don’t realize, however, is that a well-intentioned inheritance – left without the right legal structure in place – can actually work against the person you are trying to help. In some cases, it can cost them the very benefits they depend on.
This post explains why. In our follow-up post, we will walk through the planning tools that can prevent it.
The most important thing to understand is that most of the best options for protecting an ODSP recipient’s benefits must be put in place before you pass away. The time to act is now, while you are doing your estate planning, not after an inheritance has already been received.
What Is ODSP and How Does It Work?
ODSP is a provincially funded program that provides income support to Ontarians with disabilities who are in financial need. For many recipients, it is not just a source of income – it also provides access to drug benefits, dental coverage, vision care, and other supports that are difficult or impossible to replace.
To qualify for ODSP, a recipient must meet both a disability test and a financial test. The financial test is where estate planning becomes critical. As of the date of this blog, a single person on ODSP cannot hold more than $40,000 in what the program calls “non-exempt” assets. For couples, the combined limit is $50,000.
If a recipient’s assets go above that threshold, their ODSP benefits are suspended – not gradually reduced but suspended – until their assets come back down below the limit. And if they cannot bring their assets back within the limit within a set period, their benefits can be cancelled entirely.
An inheritance, received directly and without planning, can easily push someone over that limit overnight.
A Common – and Entirely Preventable – Scenario
Consider this situation, which plays out more often than most families expect:
A parent passes away and leaves $200,000 to their adult child, who has been on ODSP for years. The parent meant to provide for their child’s future – to give them security and comfort. But because no special planning was done, the funds are paid directly to the child. The child’s ODSP caseworker is notified. Their benefits are suspended. They now have a limited window to spend down, shelter, or otherwise deal with $160,000 above the asset limit – or risk losing their benefits permanently.
This is not a rare case. It happens regularly, and it is almost always the result of an estate plan that simply did not account for the beneficiary’s ODSP status.
The tragedy is that it is almost entirely preventable, with the right planning done in advance.
Why Leaving Money Directly to Someone on ODSP Often Doesn’t Work
When a person on ODSP receives an inheritance directly – whether through a Will, as a named beneficiary on a life insurance policy, or through a joint account – ODSP treats those funds as the recipient’s asset. That is true regardless of your intentions and regardless of how the money is described.
Some families try to work around this informally – for example, by leaving the money to a sibling with an understanding that they will look after the ODSP recipient’s needs. This approach is risky for several reasons:
- It relies entirely on the sibling’s goodwill and good judgment, with no legal protection for the ODSP recipient.
- It can create tax and estate complications for the sibling who receives the funds.
- It provides no protection if the sibling faces their own financial difficulties, relationship breakdown, or death.
- If ODSP determines that the funds are beneficially owned by the recipient – even informally – they may still be counted as assets.
A properly structured legal arrangement is the only reliable way to protect both the inheritance and the benefits.
The Law Does Provide a Path – But It Requires Planning
Ontario’s ODSP regulations recognize several “exempt” assets – things that a recipient can own without those assets counting toward the $40,000 limit. These include their home, one vehicle, a prepaid funeral arrangement, funds in a Registered Disability Savings Plan, and, most importantly for estate planning, assets held in certain types of trusts.
The most powerful of these is called a Henson Trust. A Henson Trust is a specific type of trust that can be created in your Will, designed to hold an inheritance for the benefit of a person on ODSP without those funds being counted as the recipient’s assets, regardless of how large the trust is.
There are also options for ODSP recipients who receive an inheritance without a Henson Trust in place, though those options are more limited and come with caps and conditions.
We will cover all of these tools in detail in our follow-up post: “Planning for a Loved One on ODSP: The Tools That Can Protect Their Benefits.”
What You Should Do Now
If you have a family member on ODSP and you are making or updating your Will, here is the most important step you can take: tell your estates lawyer about your family member’s ODSP status at the outset of your planning conversation. This is not a complicated disclosure – it is simply the information your lawyer needs to recommend the right structure for your estate plan.
With the right planning, you can leave a meaningful inheritance to a loved one on ODSP without disrupting their benefits, their care, or their stability. Without it, even the most generous gift can create real hardship.
The time to have that conversation is now.
This blog post was written by Diana Tebby, a member of the Real Estate and Wills and Estates teams. She practices in both our Ottawa and Perth offices and can be reached at 613-369-0384 or at [email protected].
