Planning for the long-term financial well-being of individuals with disabilities provides them a degree of stability and independence that all clients deserve. Families and caregivers often face uncertainty about how to provide consistent support while navigating complex government programs and financial planning rules.
For advisors, the primary opportunity is not in simply identifying disability planning tools. It is in integrating them into a coordinated strategy that aligns tax considerations, estate structure and government benefit entitlements over multiple decades.
The registered disability savings plan (RDSP) and Henson trust each offer significant advantages. But optimal results depend on a detailed understanding of how they interact and how those interactions affect federal and provincial benefit entitlements.
As family income levels, caregiver roles and the beneficiary’s capacity evolve, these planning decisions require ongoing recalibration rather than a one-time implementation.
The RDSP provides compelling savings incentives, but advisors must navigate technical nuances that can materially affect outcomes. Contribution timing, particularly in relation to the beneficiary’s family net income, can determine the level of annual grants and bonds available.
The assistance holdback rules create additional planning challenges — premature withdrawals can trigger repayment of up to a decade of incentives, making liquidity planning and sequencing of withdrawals critical.
In later life stages, advisors must assess how mandatory lifetime disability assistance payments fit within the client’s overall income profile, including the tax impact and coordination with other registered plan withdrawals.
Henson trust complexities
Henson trusts introduce a separate layer of complexity. Although their discretionary nature allows trust assets to be excluded from provincial disability benefit calculations, advisors must anticipate how distributions will be treated by various programs and how they interface with the beneficiary’s other sources of income.
Trust governance, trustee capacity and documentation including letters of wishes become central to ensuring the trust operates consistently with both statutory requirements and family intent. Advisors can work with trustees to align the trust’s investment strategy with the RDSP and to guide decisions about which expenditures should be made from the trust to maintain benefit eligibility.
The trust can serve as a vehicle to hold inheritances, real property and insurance proceeds while continuing to protect access to income-tested programs.
Interplay between the RDSP and Henson trust must be carefully managed within the context of a broader estate and financial plan. Advisors can guide families in determining which expenses are optimally funded from the RDSP versus the trust, accounting for tax treatment, liquidity demands and potential impacts on federal and provincial benefits.
Coordinating beneficiary designations, ownership structures and the timing of intergenerational wealth transfers is essential to avoid inadvertently triggering clawbacks, taxable dispositions or administrative complications for future trustees. As primary caregivers age, comprehensive planning including trustee succession, documentation of caregiving arrangements and alignment with the will and power of attorney are crucial for ensuring continuity of support.
Professional guidance is indispensable in this environment. Small changes in income, asset ownership or withdrawal timing can have disproportionate consequences for grant eligibility, trust administration and disability benefit calculations.
Advisors who understand the technical rules governing RDSP incentives, trust law and provincial disability regimes can help families manage these interdependencies more effectively, preserving flexibility while minimizing risk. Collaboration with legal professionals is necessary to ensure trust documents and estate plans reflect current legislation and are structured to achieve the intended benefit protection.
Achieving long-term financial security for Canadians with disabilities requires a thoughtful blend of planning, the right legal and financial tools and a clear understanding of available sources of government support.
The RDSP offers unmatched advantages through government grants and bonds, helping families grow savings without affecting eligibility for key benefits. Meanwhile, Henson trusts provide a vital layer of protection, allowing families to leave assets for future care while preserving access to income-tested programs.
Together, these tools form a powerful foundation for financial independence and stability. With proper planning and professional guidance, families can ensure their loved ones are not only supported today, but well-protected for the future with dignity, choice and peace of mind.
Alyssa Mitha is assistant vice-president, tax and estate planning, with Mackenzie Investments.