Submissions - Mississauga Homes for Independent Living

Technical Advisory Committee on Tax Measures for Persons with Disabilities

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Submission from the Mississauga Homes for Independent Living

Submitted to the:

Technical Advisory Committee on
Tax Measures for Persons with Disabilities

The 2000 budget announced by the Minister of Finance contained several measures to extend support and improve tax assistance for Canadians with disabilities and their families. These measures included extended eligibility for the disability tax credit, increase of the maximum child care expense deduction, extended tax assistance for expenses related to adapting a new home for a disabled person and expanded attendant care deductions. However, these measures apply largely to ongoing support costs within the family home and help very little in defraying costs of establishing an individual in an independent home setting.

At the provincial level, many parents have been impacted by reductions of transfer payments to provinces combined with provincial budget cutbacks for social service programs over the years resulted in an indirect impact to families requiring them to pay more and more for services for their sons and daughters having intellectual disabilities. This has resulted in many families who expected government-funded support to be now faced with the difficult task of finding dollars to pay for attendant care, housing costs, and other costs related to the general well being of their loved ones.

This request proposes the creation of a Registered Disability Savings Plan “RDSP” fashioned somewhat along the lines of the existing Registered Education Savings Plan “RESP” which would allow families to save into a trust, in a tax deferred form, to help pay the support costs of family members having a disability to establish independent living settings.

When implemented an RDSP would provide a tax effective savings vehicle starting at an early age for the parents of an individual with an intellectual disability whereby the RDSP would be used exclusively for the purpose of funding the ongoing and future support needs of the individual throughout his or her life. An RDSP could be used for the payment of such expenses as full and part-time attendant care, living expenses (beyond those related to provincial disability support payments) and costs related to the provision and maintenance of a home. Such a scheme would be of great benefit to families who are often overwhelmed by the added load of finding adequate dollars to support their loved ones in the midst of reduced government services.

As was stated previously, the 2000 Federal Budget dealt with a number of matters related to tax relief for families shouldering these increased expenses however more relief is required for families wishing to provide long term independent living arrangement for their children having intellectual disabilities. Importantly, it would be beneficial if

additional recognition was given with respect to tax relief for families who chose not to burden the government with the costs of institutionalization but rather have decided to care for the individuals themselves. This is particularly worrisome for elderly parents who have now aged to the point of being forced to provide alternate care provisions for their loved ones.

The concept for the creation of a Registered Disability Savings Plan “RDSP” was passed by way of resolution at the Annual General Meeting of Community Living Ontario on June 2, 2001. A subsequent resolution calling for the creation of a RDSP by the federal government was also passed by the Canadian Association of Community Living federation.

Respectfully submitted by:

Mississauga Homes for Independent Living,
November 19th, 2003

Leaving RRSP Funds to an Infirm Child or Grandchild

Under the Income Tax Act:

• A “refund of premiums” resulting from the death of an annuitant of an RRSP can be paid out of the RRSP to a dependent child or grandchild.
• For tax purposes the amount will be included in the child’s income.
• Tax by the child may be deferred by transferring the proceeds to an RRSP, RRIF or eligible annuity with funds accumulated tax free.
• Currently trusts do not qualify but amendments are underway to allow a trust to receive the same treatment as RRSPs, RRIFs or eligible annuities.
• Refund of premiums directed to a Trust under the amended Tax Act requires that the person receiving the proceeds be the “sole person beneficially interested” in the trust which is not the definition of an absolute discretionary trust.
• By not allowing a direction to a Henson style absolute discretionary trust, the amount that can be put into a trust is limited and the person’s ODSP will be negatively affected if the amount put into the trust is greater than $100,000 and that there is no ability to designate beneficiaries of any monies remaining in the trust when the person who has the disability is no longer living.

Recommendation:
The Income Tax Act [subsection 146(1)] needs to be changed to allow a “refund of premiums” from the death of an annuitant of an RRSP be directed to a Henson style trust in order to preserve the person’s eligibility to ODSP, or if appropriate, other provincial disability pension entitlements.