I appreciated the opportunity to present to the Fraser Valley Estate Planning Council on "Estate Planning for Disabled Beneficiaries" earlier this week. I shared a comprehensive resource I created for families to help them navigate all the various information and programs that may apply to them: https://lnkd.in/ge-9Nmja.
One potential estate planning option for disabled beneficiaries that is lesser known is the Lifetime Benefit Trust (LBT).
Established in a will, the LBT is intended to address the problems that can arise if the financially dependent child suffers from a mental impairment. Under the LBT structure, you can leave your RRSP/RRIF on a tax-deferred basis to a trust (not a RRSP or RRIF) established for a mentally infirm and financially dependent child.
The trust transfer is conditional on the child being dependent, because of mental infirmity, on the deceased individual immediately before their death and must be a personal trust where, during the child’s lifetime, no person other than the child may benefit from the income or capital of the trust (s. 60.011 of the Income Tax Act).
The entire RRSP/RRIF payout must be used to purchase a qualifying trust annuity (QTA). An annuity is a form of investment that pays an annual amount for the remaining lifetime of a specified person (in this case, the infirm dependent) or for a fixed term (in this case, the maximum fixed term would be equal to 90, minus the age of the child).
There is some negotiation room as to the exact terms of the annuity acquired. However, the annual payments will usually depend on economic expectations and interest rates that are prevalent at the time that the annuity is purchased.
The LBT would acquire the annuity and would receive the annuity payments. The trustee would then decide whether and to what extent to pass the annuity payments through to the child. All amounts passed through to the child would be taxed as ordinary income of the child. On the death of the child, any remaining value of the annuity will be taxed as ordinary income of the child. The terms of the LBT could provide that the after-tax amount be paid to other persons after the death of the child.
Precedent language for a LBT, drafted by Mary Hamilton and Sadie Wetzel, is included at the bottom of the website www.disability-planning.ca.
On Tuesday, we kicked off our 2024-2025 season with Nicole Garton's excellent presentation on Estate Planning for Disabled Beneficiaries. Thank you, Nicole Garton, for sharing your extensive knowledge with us. Our membership will be very well-equipped to support disabled people and their families in all the details of their estate planning.
Shout out to Heritage Trust for also sponsoring this dinner event. We appreciate you!
#estateplanning #disabledbeneficiaries #FraserValley #FVEPC
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1wFier d'avoir eu des collègues tels que vous ...bravo