- Secure the Disability Tax Credit Certificate. The Disability Tax Credit Certificate will provide you with tax credits that can save you a significant amount of money in taxes. This is not to be overlooked. If you have a child with a disability that qualifies for the certificate, the tax credit for 2011 is $7,341. If your child is under 18, an additional credit called the Disability Tax Credit Supplement is available as well, equal to $4,282 for 2011. If your child has had a disability for 10 years or more, you may be able to claim these tax credits going back as far as 10 years if you never claimed these credits – many people have received thousands of dollars in doing so.
- Open up a Registered Disability Savings Plan (RDSP) account as early as possible and maximize the government contributions every year. The RDSP was created to promote long-term savings to help support individuals with disabilities later in life. The earlier you start the earlier your child will be able to access the funds in the account without the government retracting any contributions they made. The downside of withdrawing money too early is severe. Those who maximize the contributions may realistically accumulate over $300,000. Maximizing government contributions will cost you $1,000 or $1,500 a year, depending on family income.
- Protect your income and assets if you and your family rely on it. If losing your income or significant assets (i.e. house, retirement investments, etc.) would create serious hardship, consider insuring your income and your assets. The question you can ask yourself to assess the need is, “what would happen to me and my family if I became disabled due to an accident or illness and my income disappeared or was reduced dramatically?” The other question is, if I were to die, how would my family fair financially?” If your answers describe hardships you would not be willing to endure or your family to endure, speak to an expert you trust.
- Prepare your last will and testament. Find a lawyer who has worked with many families who have kids with disabilities because there are some very particular estate planning strategies for parents of children with disabilities, especially if your child is or will be on ODSP. Unless your child will be able to support themselves, financially through their adulthood, the absence of a properly structured estate plan that is well funded can severely affect your child’s quality of life once you pass away.
- Get the right advice and support. Either get your current advisor to support you on these particular planning objectives or find one that will. Just bear in mind, as your child grows older, especially if they need to rely on ODSP, you will benefit a great deal more if your advisor understands the disability sector and the related financial planning issues. In addition to helping you determine the appropriate products and solutions, they should also help you implement these solutions in a thoughtful and manageable manner. Your advisor should understand your financial circumstances, including the limits of your resources and the other competing priorities you must manage.
Written by Ron Malis, June 2012. Originally posted in Connected Families
Ron Malis is an Insurance Advisor with Independent Financial Concepts Group Ltd. and a Financial Advisor with Worldsource Financial Management Inc. His core focus is working with people with disabilities and their supporting family members. Ron has written many articles on the subject of ODSP, the RDSP and estate planning for families who have children with disabilities. These can be found at www.ronmalis.com