Estate Planning for Families of Special Needs Children

1. Estate Planning for Families of Special Needs Children Presented By: TRISTA D. CAREY Partner, Schnell Hardy Jones LLP Schnell Hardy Jones LLP

2. Planning Overview • Enduring Power of Attorney • Personal Directive • Will • Does your adult child have: • Court appointed Guardian? • Court appointed Trustee? Schnell Hardy Jones LLP

3. What is a… Power of Attorney? • Document that appoints someone, on temporary or permanent basis, to make financial decisions for you • Two types: • Immediate – no requirement for incapacity • Springing – only comes into effect upon infirmity or mental incapacity • Ensures your financial affairs are managed during infirmity or incapacity, including business matters Schnell Hardy Jones LLP

4. EPA cont’d • Within document, you can provide for support payments to be made to guardian of children for their maintenance • May need to include certain other types of provisions depending on care arrangement for child (i.e. if child resides with you, making adequate provision to maintain house, etc.) Schnell Hardy Jones LLP

5. What is a… Personal Directive? • Document that appoints someone, on temporary or permanent basis, to make personal decisions for you, including: • Health care; • Accommodations; • Whom you may Live and Associate with; • Participation in Education, Employment and Social Activities; • Legal Matters not pertaining to your Estate. • Comes into effect upon mental incapacity Schnell Hardy Jones LLP

6. PD cont’d • Can include appointment of temporary guardian of minor children, and also adult child subject to guardianship order • May need to include certain other types of provisions depending on care arrangement for child (i.e. if child resides with you, making adequate provision to maintain house, etc.) Schnell Hardy Jones LLP

7. Why You Need a WELL-DRAFTED Will… • CONTROL!! • In a Will, you decide who will administer your estate, and who will be a beneficiary upon your death • Proper planning to ensure adequate provision for your dependants, and in most appropriate fashion • Take advantage of any eligible tax rollovers and other planning Schnell Hardy Jones LLP

8. EASE OF ADMINISTRATION • Administering an estate is hard enough; if you don’t leave instructions for dealing with your estate in a valid Will, loved ones will struggle to pay bills and distribute assets • Complicated estates – legislation doesn't give much guidance • Banks / Financial Institutions look to Will for authority / appointment of legal representative • Simplify and streamline administration process to avoid unnecessary costs and delays Schnell Hardy Jones LLP

9. Things to Think About & Planning Tips Schnell Hardy Jones LLP

10. What's in Your Estate • Only those assets and liabilities in your sole name at date of death, and not designated • Assets passing outside Estate: • Jointly Held Assets • Real Property (land and buildings) • Personal Property (vehicles, investments, bank accounts, etc.) • Presumption of Right of Survivorship applies – asset rolls over to surviving spouse • Presumption can be rebutted – if surviving owner did not contribute to acquisition of assets, then considered to be held in trust and assets clawed back into Estate • Good Idea to clarify intentions Schnell Hardy Jones LLP

11. Beneficiary designations • Designate a beneficiary on any asset allowed: • Insurance policies • RRSPs • Tax Free Savings Account (TFSA) • Sometimes designate Estate for purpose of paying debts / taxes so not to infringe on capital of Estate • Gift goes directly to beneficiary • Avoids creditors • Estate usually still pays any taxes associated with designated assets (i.e. RRSPs / RRIFs, unless spousal rollover applies) • Can be done in Will or directly on asset, but specifying in Will can provide better control over distribution of asset Schnell Hardy Jones LLP

12. Administration of Estate • There is a priority of payments to be made from Estate • Payment of Debts and Administrative Expenses of Estate • Debts of Estate, including funeral expenses and third party creditors • Legal fees • Accounting / Financial advisor / Realtor fees • Personal Representative fees/compensation & reimbursement for out of pocket expenses Schnell Hardy Jones LLP

13. Taxes • Deemed to dispose of everything immediately prior to death and taxed on it (if taxable) • Proper planning can avoid some unnecessary taxes • Alberta does not have death taxes, just filing fees at courthouse for Grant of Probate or Administration • $35 (for Estates <$10,000) up to $525 (for Estates >$250,000) – fees increase in increments • After debts and taxes are paid, then can distribute remainder to those beneficiaries you want to receive it! Schnell Hardy Jones LLP

14. Who Do You HAVE TO Provide For? • You are only obligated to provide for dependants in your Will • Who are your dependants? • Spouse / Common Law partner (of at least 3 years) • Minor children • Represented adults (those dependants who cannot withdraw from financial dependence upon you when they reach age of majority) Schnell Hardy Jones LLP

15. Estate Planning when special needs child is (a) beneficiary • Guardianship • Trusts • Registered Disability Savings Plan (RDSP) • Designated Assets • RRSP rollovers • Providing for other children • Other considerations • Role of Public Trustee in Estate Schnell Hardy Jones LLP

16. Guardianship • If special needs child is still minor: • No different treatment than any other minor child • Usually acknowledge surviving parent as guardian, with at least one alternate appointed • If special needs child is over age of majority and requires guardian • Acknowledgment of Guardianship Order and those appointed within is easiest, as Order and therefore Guardians and Alternate Guardians can change over time Schnell Hardy Jones LLP

17. TRUSTS • Necessary for minor beneficiaries and represented adults • Different types of trusts • Vesting • Non-vesting • Vesting Trusts • Vesting means when beneficiary gets control of funds in trust – outright gift of property at some future time • Can determine age; does not have to be at age 18 Schnell Hardy Jones LLP

18. Trusts cont’d • Payments can be made for beneficiary’s maintenance and benefit before trust vests or simply kept invested – depends on legal obligation to beneficiary • In some cases can stipulate purpose (i.e. post-secondary education) • Payments to minors or represented adult beneficiaries are paid to parent/ guardian or third party on beneficiary’s behalf Schnell Hardy Jones LLP

19. Henson Trust • Non-vesting • Best known as “Henson Trust” • Discretionary trust which does not vest in beneficiary • In June 2018, new legislation passed in Alberta, authorizing use of these types of trusts as estate planning tool – no restrictions on the size / value of the trust • Trustee will automatically be named Personal Representative, unless specified to contrary • Consider interplay between court appointed Trustee and Trustee appointed in Will Schnell Hardy Jones LLP

20. Henson Trust cont’d • Within trust, can specify all uses available for Trustee at his/her discretion • Very important to stipulate that Trustee has ultimate discretion whether some or all (or none) of the funds will be used for beneficiary • Critical to stipulate that beneficiary never has any control over capital or income, in terms of how, when, where, and if, money will be spent • Upon death of beneficiary, specifies contingent beneficiary (ultimate recipient of trust funds) Schnell Hardy Jones LLP

21. Henson Trust cont’d • Why we like them: • Allows us to make money available for dependant (represented adult) without an outright gift to them, so does not impact their estate • Now does not interfere with determination of eligibility for AISH and other government funding • Can still give remaining funds to other children / beneficiaries Schnell Hardy Jones LLP

22. Henson Trust cont’d • CAUTIONS: • Consider the life expectancy of beneficiary • Does this impact choice of Trustee(s) – may be required to administer this Trust for very long time • How long do contingent beneficiaries have to wait to get their share • No requirement to balance needs of specific beneficiary of trust with ultimate beneficiaries of trust - this can be good or bad – may be nothing left over for contingent beneficiaries • Any income from Trust will set off AISH funding dollar for dollar – must be very careful about discretionary distributions from Trust that exceed AISH income restrictions Schnell Hardy Jones LLP

23. Registered Disability Savings Plan (RDSP) • Must qualify for disability tax credit to be eligible • Exempt asset per AISH rules • Long term savings plan; contributions must be made before beneficiary turns 60 years old • Canada Disability Savings Grant • Gov’t matches up to 300% depending on beneficiary’s family income, with $3,500/yr limit and $70,000 lifetime limit • Grants issued up to year end when beneficiary turns 49 Schnell Hardy Jones LLP

24. RDSPs cont’d • Canada Disability Savings Bond • For low and modest income families; can receive up to $1,000/yr to $20,000 lifetime limit • No requirement to contribute to RDSP • Bonds issued up to year end when beneficiary turns 49 • Contribution limit is $200,000 • Some carry forward of unused entitlements • Vesting rules – money must remain in RDSP for minimum 10 years or repayment of grants/bonds required Schnell Hardy Jones LLP

25. RDSPs cont’d • Registered Education Savings Plans (RESP) • If you have funds saved in RESP for child and child doesn’t use some or all of funds, can roll into RDSP if meet qualification requirements on tax-deferred basis Schnell Hardy Jones LLP

26. DESIGNATED ASSETS • Includes: • RRSPs • TFSAs • Life insurance • Private pension plans Schnell Hardy Jones LLP

27. DESIGNATED ASSETS • Can be very useful in estate planning, depending on circumstances • RRSPs • Roll over to spouse on tax-deferred basis • Can roll over to RDSP upon death on tax-deferred basis if following criteria met: • Beneficiary is child or grandchild of deceased AND • Financially dependant upon deceased prior to death • Rolled funds will not qualify for savings grant • Still restricted by $200,000 lifetime contribution limit Schnell Hardy Jones LLP

28. Designated Assets cont’d • TFSAs, Life Insurance, Private pensions • Can be used to transfer some wealth to other children / beneficiaries outside of Estate upon death • If everything within Estate and determined all (or majority) is needed for special needs child, other beneficiaries likely have to wait until death of that child to benefit from Estate Schnell Hardy Jones LLP

29. OTHER CONSIDERATIONS • Involvement of Public Trustee • OPT must be notified and served copy of application for probate / administration if minor children or represented adults have interest in Estate • OPT has ability to evaluate the provision made in the Will for the special needs child and determine if sufficient for that child’s maintenance and support throughout lifetime Schnell Hardy Jones LLP

30. QUESTIONS? Schnell Hardy Jones LLP