ABA Pub Flyer

The Central City Pub has won numerous awards for their craft beers. My personal favorite is the Imperial IPA. For every bottle sold, $5 is being donated to the Canucks Autism Network and Autism Spectrum Disorders Canadian-American Research Consortium (ASD-CARC).

This promises to be a fun night for a good cause.

Some examples of Attendant Care include:

• Hiring a nanny to care for your child (full time or part time)
• Paying a babysitter or child care worker
• House cleaning services (Yes, it’s true! Check out 2007 Tax Court of Canada case, Zaffino v. the Queen)
• Full or part time care in a school, institution, or other establishment (to claim these expenses, a medical practitioner must confirm the person’s need for the equipment, facilities, or personnel available in the establishment)
• Transportation services
• Maid service
• Meal preparation
• Care or supervision in a group home
• Respite

Attendant Care is claimed as part of the Medical Expense Tax Credit. This means that you will get about 20% of your money back.

You may claim up to $10,000 and still receive the Disability Amount. Note that this is per paying individual. Each spouse may contribute the $10,000 for a total of $20,000. This amount may then be combined and claimed as a medical expense. To do this, each supporting individual must have receipts to back up their claim.

Claiming attendant care costs higher than $2,578 (for the 2012 tax year) will reduce the Disability Amount Supplement.

You may claim more than the $10,000 however this will reduce the Disability Amount. I do not recommend that you claim more than this amount unless the attendant care expenses go beyond $17,546 (for the 2012 tax year).

Tax Tip

Hire a relative to care for your disabled child. The individual must not be your spouse or common-law partner and must be at least 18 years of age. You also have to provide invoices with the individual’s SIN number.

This should enable your child to benefit from a wider range of activities than he/she would be able to access using Invoice Funding. One of the requirements is that your child must have been on Invoice Funding for at least two years.  If your child has an autistic sibling over the age of six, they would both qualify for Direct Funding.

The administrative details will come later and I’m sure they will be as bizarre and unwieldy as Invoice Funding, but nonetheless it is a positive step forward. When they finally publish the details, you can be sure I will have more to say about it.

The link to the news release is below.

IB_Direct Payment_Autism Funding_March 12 2013_FNL

• Expenses for child care may be claimed if both spouses work, go to school or carry out research
• Up to $10,000 may be claimed if your child is eligible for the Disability Amount

Tax Tip#1

If you hire someone to care for your child even in the context of ABA therapy or tutoring, you should adjust the invoice and receipts to reflect child care until you reach the $10,000 limit.

Tax Tip#2

Child care expenses are a tax deduction and not a tax credit. That means for every dollar you spend on child care it will reduce your taxes owing by your marginal rate. For the highest tax bracket, this means you will get a tax savings of $0.43 for every dollar claimed. This is significantly more than the maximum 20% that you would receive for a medical expense claim. Refer to TaxTips.ca for your personal combined Federal and Provincial tax rates.

Tax Tip#3

Hire a relative aged 18 or older (or other person of any age) and claim these costs as a child care expense. Note that you must have proper invoices and receipts including the person’s SIN number.

Tax Tip#4

Other eligible care child expenses include

• caregivers providing child care services;
• day nursery schools and daycare centres;
• educational institutions, for the part of the fees that relate to child care services;
• day camps and day sports schools where the primary goal of the camp is to care for children
• boarding schools, overnight sports schools, or camps where lodging is involved (other than education costs)

Refer to my page Child Care Expenses for more detail.

Next time: Attendant Care Expenses

• spouse or common-law partner amount (line 303);
• amount for an eligible dependant (line 305)
• amount for children born in 1995 or later (line 367); and
• caregiver amount (line 315)

The child must have an impairment that is prolonged and indefinite and the child must be dependent on you for assistance in attending to personal needs and care when compared to children of the same age.

You must have a signed statement from a medical doctor showing when the impairment began and what the duration of the impairment is expected to be. For children under 18 years of age, the statement should also show that the child, because of an impairment in physical or mental functions, is dependent on others for an indefinite duration. This dependence means they need much more assistance for their personal needs and care compared to children of the same age. For your convenience, there is a sample letter on my Files page, which you can complete before the doctor’s appointment and present to him/her for a signature.

For more information refer to page 33 of the 2012 Tax Guide

For those of you that use Turbo Tax here is a detailed guide on how to apply for the credit: http://support.intuit.ca/turbotax/en-ca/iq/Dependants/Family-caregiver-amount/INF21867.html

You have been presented with lot of information over the past couple of months regarding future planning for your disabled child. Today I am going to simplify everything down to a few important points.

Assuming your child is a minor and still years away from adulthood, there are just a few things that you need to do now. You should:

• Have a will constructed by a lawyer who understands disability issues. Take the Wills and Trusts seminar from PLAN prior to consulting the lawyer. Do not use a cheap wills kit. You need to have a lawyer involved because of the disability issues.
• Apply for the Disability Tax Credit Certificate.
• Open an RDSP. This one is a no-brainer. There is no disabled child that will not benefit from this generous government program.

There are a few other issues that can wait until your child is a teenager, at which time you need to start planning for their financial future. This includes:

• Filing an income tax return on behalf of your child. Family income from 2 years prior is used for assessing the government bonds and grants for the RDSP. This means that beneficiaries will have to file tax returns beginning the year they reach age 17 if they wish to receive the maximum grant and bond in the year they reach age 19.
• Educating yourself regarding discretionary trusts. If such a trust makes sense for your family, you need to see a lawyer to have it set up.

I have touched briefly on some of the financial issues dealing with transition to adulthood. There are numerous resources which will go into much greater detail about savings vehicles such as RDSPs and discretionary trusts. My personal favorite is PLAN. They have books, on line learning, and in-person seminars. PLAN has published a book entitled “Safe and Secure” which I highly recommend. You can pick it up for free at any London Drugs store in BC.

This has been a very brief and simple overview of some of the ways you can plan for a secure financial future for your disabled child. The primary message that I wanted to convey was that families of any financial means can plan for the future of their children.

The key point is that these trusts are discretionary (in legal terms they are called “absolute discretionary trusts”) in that the trustee has absolute discretion in the disbursement of funds from the trust for the benefit of the beneficiary.

Courts in Canada have determined that money held in a discretionary trust (also called a “Henson Trust” or a “Supplemental Needs Trust”) for a person with a disability does not affect the person’s ability to receive their Disability Assistance. In BC, if the funds from the trust are used to cover “disability related expenses”, without being given to the beneficiary as cash, they will have no impact on the beneficiary’s continued receipt of Disability Assistance without the PWD clawback that I referred to in previous posts.

Trusts can be complicated and need to be constructed by a lawyer who specializes in this field. It should also be accomplished in conjunction with writing your will. Before rushing off to the lawyer’s office, I recommend that you take the PLAN – Wills and Trusts seminar (on-line or in person) to work through your personal details. Part of the course involves filling out a worksheet which is invaluable when you finally meet the lawyer to setup the trust.

Discretionary trusts are a valuable tool for high income households to plan for special needs individuals who are unable to manage their finances and at the same time maximize the PWD benefits.

Does every special needs person need a trust? Absolutely not! In the past, a discretionary trust was the only way to supplement the income of a person in receipt of Disability Assistance. Now we have the RDSP which is much easier to manage and more accessible to those of more modest incomes. The primary limitation of an RDSP is the $200,000 maximum lifetime contribution limit, but with proper planning this may be more than enough. Having said that, the optimal solution is to have both a discretionary trust and an RDSP. The withdrawal rules are different for each of them and a trustee can use those rules to maximize the financial benefit to the beneficiary.

An outstanding guide to trusts can be found on The Voice of the Cerebral Palsied of Greater Vancouver.

The role of the trustee is a demanding one and perhaps more than could reasonably be expected of most people. You may want to consider The Coast Financial Trust Program. They will assist you in setting up and administering the trust. Given the difficult task, the fees are quite reasonable.

Firstly, a rollover is an indirect tax-deferred transfer of certain amounts to an RDSP beneficiary’s plan. Rollover amounts must originate from a Registered Retirement Savings Plan, Registered Retirement Income Fund, or Registered Pension Plan of an RDSP beneficiary’s parent or grandparent. Such amounts may only be rolled over if the RDSP beneficiary was financially dependent upon the parent or grandparent at the time of the parent or grandparent’s death because of a mental or physical infirmity.

Here are some reasons why it makes sense:

• If funds from an RRSP are willed directly into the hands of the beneficiary, the funds are first subject to full taxation before being passed on.
• A direct transfer of funds will trigger a Persons with Disability (PWD) clawback effectively nullifying the transfer.
• A rollover to an RDSP is much easier to administer than a discretionary trust.
• The rollover funds are transferred without triggering taxation. Inside the RDSP, the funds continue to accumulate tax free until funds are withdrawn at which time they are subject to taxation in the hands of the beneficiary.
• In the case of a grandparent this can be an effective way to pass on funds in a tax efficient manner without affecting the individuals Disability Assistance payments.

There are a few limitations that you need to be aware of:

• A rollover is subject to the maximum $200,000 lifetime contribution limit to an RDSP.
• A rollover will not attract a Canada Disability Savings Grant.
• Once the plan has received the maximum contribution limit, no further Canada Savings Grants are possible.

• Effective 2013 any investment income earned in the RESP may be transferred on a tax-deferred basis to an RDSP.

To qualify for the tax-free rollover the beneficiary must meet one of the following conditions:

• The beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent the beneficiary from pursuing post-secondary education;
• The RESP has been in existence for at least 10 years and each beneficiary is at least 21 years of age and is not pursuing post-secondary education; or
• The RESP has been in existence for more than 35 years.

How are the funds taxed as a result of the rollover?

• When an RESP rollover occurs, contributions in the RESP will be returned to the RESP subscriber (parent or grandparent) on a tax-free basis. As well, Canada education savings grants and Canada learning bonds in the RESP will be required to be repaid to the government. The investment income will be transferred tax free to the RDSP.

If you have set up an RESP and are considering closing it, there is no longer a rush to make a decision. Any income derived from the account can now be used for the child’s benefit in the RDSP.

Refer to the Budget 2012 Registered Disability Savings Plan (RDSP) for more detailed information.

Things have now changed. Since 2011, you are now allowed to carry forward unused grant and bond entitlements to future years. The carry forward period can only start after 2007 and lasts for 10 years. Considering the age of your child and the number of years since the disability commenced this can be a significant amount of money. The government will contribute up to $3,500 per year in grants and up to $1,000 in bonds. Refer to my page RDSP for more details.

For those of you who haven’t yet started an RDSP, there is a lot of money on the table and now is the perfect time to set up the account and collect all the government grants and bonds back-dated to 2008. Remember that the child must qualify for the Disability Tax Credit in order to open an RDSP.

A word of caution; don’t use this as an excuse to put off contributions to the RDSP. Firstly you never know when or if the government might change the rules and secondly the earlier you start the more time you have to compound your returns.

If you have not yet educated yourself about the RDSP, please refer to my page RDSP or go to RDSP.com for a more detailed look at the plan.