TABLE OF CONTENTS - Law Society of...

TABLE OF CONTENTS

I. INTRODUCTION 2

II. THE DEPENDANT'S RELIEF ACT 3

A. CASE LAW 4B. ApPLICATION OF OSTRANDER IN OTHER "DEPENDANT ADULT CHILD" SASKATCHEWAN CASES 6C. OTHER SASKATCHEWAN CASES 7D. AN INTERESTING NORTH WEST TERRITORIES CASE 9E. OOSTERHOFF'S COMMENT ON THE SUPPORT OF DEPENDANTS 10F. THE ROLE OF THE PUBLIC GUARDIAN AND TRUSTEE (PGT) 10

III. THE POWERS OF ATTORNEY ACT 11

IV. THE HEALTH CARE DIRECTIVES AND SUBSTITUE HEALTH CARE DECISION MAKERSACT 12

V. THE ADULT GUARDIANSHIP AND CO-DECISION-MAKING ACT 13

A. ApPOINTING A DECISION MAKER FOR YOUR DEPENDENT CHILD IN YOUR WILL 15B. PRESERVING THE ELDER PARENT'S TESTAMENTARY INTENT 16

VI. BENEFITS, ASSISTANCE AND OTHER PLANNING ISSUES 16

VIII. THE USE OF TRUSTS 22

A. DEPENDANT'S RELIEF ACT TRUST 22

B. DISCRETIONARY TRUST ("HENSON TRUST") 23

IX. SOME INCOME TAX ACT CONSIDERATIONS 25

A. TESTAMENTARY TRUSTS 25B. RRSPS AND RRIFS 26C. LIFE INSURANCE 29D. DEDUCTIONS AND CREDITS 30

X. APPENDIX 1 34

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A Holistic Approach to the Elder Parent and the Dependent AdultChild

I. INTRODUCTION

The Elder Parent with a dependent adult child ("Dependant" or "Child") has a complex series of

issues to consider in determining how best to attend to that Dependant's ongoing needs.

Decisions need to be made for the Dependant's care during the Elder Parent's lifetime and after

the Elder Parent's death or mental incapacity.

This paper will seek to address some of the ways that we, as legal practitioners, can help the

Elder Parent plan for the future. It is suggested that often a team approach will be necessary,

involving not only the lawyer, but financial planners, tax advisors, health care professionals and

many resource persons from the community.

It is first important to note that there is no universal definition of a dependent adult child. The

bench marks for determining legal "dependency" differ from one piece of legislation to the next

and from one province to another. As such, a child may be dependent for one set or criteria, and

not for another - or dependent in one jurisdiction and not another. In the end analysis we must

look to the Courts to refine the definition of a "dependent" or "dependant" in each given

circumstance on a case by case basis.

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II. THE DEPENDANT'S RELIEF ACT

This legislation is especially relevant if an Elder Parent is drafting a Last Will and Testament and

attempting to determine hislher obligations after hislher death. The Elder Parent must be advised

that he/she has an obligation to make "reasonable provision" for hislher "Dependants" as defined

at law. The case law in this area is illustrative of the fact that the definition of a "dependant" can

be a very tricky area of the law as the legislation varies so much from one jurisdiction to another.

Although there are many cases in this area dealing with minor children and spouses, the

emphasis for this paper is on those cases dealing with a potential dependent adult child.

The Dependants' ReliefAct, S.S. 1996, c. D-25.01 ("DRA") contains the following definition of

a "dependant":

"dependant" means:

(b) a child of a deceased who is under the age of 18 years at the time of

the deceased's death;

(c) a child of a deceased who is 18 years or older at the time of the

deceased's death and who alleges or on whose behalf it is alleged that:

(i) by reason of mental or physical disability, he or she is unable to

earn a livelihood; or

(ii) by reason of need or other circumstances, he or she ought to

receive a greater share of the deceased's estate than he or she is

entitled to without an order; .


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Section 8 of the Act directs the Court to consider the following factors in ordering maintenance:

(a) any past, present or future capital or Income from any source of the

dependant;

(b) the conduct of that dependant in relation to the deceased;

(c) the claims that any other dependant of the deceased may have; and

(d) any other matters that the court considers appropriate.

The court is also directed to consider the deceased's reasons, as far as ascertainable, for making

or not making provision for the dependant. The court can accept any evidence it considers

appropriate including a written statement that is signed and dated by the testator. In determining

the weight to be given the statement, the court can determine any inference that can be

reasonably drawn as to the accuracy or validity of the statement.

A. Case Law

The leading case in the area, Tataryn v. Tataryn Estate! considers the applicable B.C. legislation.

In Tataryn, a testator provided a life estate to his wife and provided that the entire residue of his

estate was to go to Edward, one of his two independent adult sons. His will specifically stated

that he was excluding his son John whom he did not like. The wording of the B.C. Act is very

different from our own. Unlike the Saskatchewan legislation, the B.C. legislation does not

restrict its application to dependants only. It is stated at paragraph 24:

I cannot agree that the wording of the Act suggests a strict needs-based test. As noted above, thewording is broad and capable of embracing changing conceptions of what is 'adequate, just andequitable.' The Act does not mention need. Moreover, if need were the touchstone, the failureto exclude independent adult children from its ambit presents difficulty.2

1 [1994] 2 S.C.R. 807 [Tataryn] (S.c.c.).2 Tatmyn, supra note 4 at para. 24.

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The Supreme Court of Canada, in Tataryn, broke down the obligations of a testator into two

) categories, namely, legal and moral obligations. Even though the B.c. legislation did not exclude

grown and independent children; the Court held that their moral claim could not be put very

high. The Court varied the testator's will to give each independent son an immediate gift of

$10,000.00; lessened the residue to provide more for the spouse, and divided the remaining

residue 1/3 to John, 2/3 to Edward.

Ostrander v. Kimble Estate, 3 is a claim by a common law spouse against a deceased husband. It

is quoted in this paper as it is a benchmark decision in our jurisdiction. In it, Mr. Justice Klebuc

made the following comments concerning the differences between the British Columbia and the

Saskatchewan legislation:

Is Tataryn applicable in Saskatchewan given the differences between the[Saskatchewan] Act and the [B.c.] Act, and if so, to what extent? The firstdifference involves the definition of "dependant" .

I conclude that the [Saskatchewan] Act contemplates a need maintenanceapproach. As a result, the principles in Tataryn, while still applicable, must beapplied with deference to the underlying legislative intent. Such deference willnot materially affect the legal obligation norm described in Tataryn for nothing inthe Act militates against symmetry between a testator's inter vivos obligation andthe post mortem legal obligations of her or his estate. Thus, the testator's intervivos legal obligations apply in assessing the extent of the testator's obligationsunder the Act.4

With respect to the moral obligations, the Court in Ostrander stated:

While the moral duty norm in Walker v. McDermott has applied tothe Act since Shaw, it never received the broad interpretationextended to it in Tataryn. Rather, as previously noted, Shaw andlater decisions limit the moral obligation of the judicious father toproviding adequate maintenance without regard to the spousalcompensation or equitable distributions. Their interpretation isconsistent with a need maintenance approach and the narrowerview of spousal maintenance taken prior to Moge v. Moge.. [1992]3 S.c.R. 813, [1993] 1 W.W.R. 481. In my view, Moge hasmaterially extended the moral obligations of the judicious fatherreferred to in Walker v. McDermott in addition to extending the

) 3 (1996), 146 Sask. R. 64 [Ostrander] (Sask. Q.B.).4 Ibid. at paras. 29-32 [Emphasis added].

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legal obligation of spouses generally. Therefore, the moral dutynorm currently is ofgreater significance in assessing the adequacyof a testamentary provision, and where the provision is foundwanting, in awarding an appropriate allowance having regard tothe size ofthe testator's estate, the dependant's contribution to thecreation of the estate and the competing moral claims of othersinterested in the estate. In that context reference to currentcommunity standards is not only appropriate but essential. Suchbroader application in my view does not allow for awards underthe need maintenance approach of the Act that deliberatelyfacilitate the dependant accumulating an estate for the benefit ofher or his beneficiaries at the expense of the testator's designatedb ,.r," 5eneJ lczarzes.

Based on the above, it is suggested that a concept of "moral obligation" from the Tataryn

decision has been incorporated in Saskatchewan by the Ostrander decision. Justice Klebuc

incorporates a "moral norm" into the analysis but, as noted, this is only done in the sense that the

maintenance needs are to be generously construed.

B. Application ofOstrander in other "Dependant Adult Child" Saskatchewan cases

In Re Mate,6 the applicants for relief were four daughters. They applied for an order that they

were entitled to reasonable maintenance out of their mother's estate as per [then] section 3 of The

Dependants' ReliefAct. Each of the daughters were over the age of majority, married and had

not been dependent on the deceased for quite some time. Mr. Justice Dielschneider stated::

[n]one of the applicants have demonstrated any form of dependency upon thedeceased while she was living. Each applicant is now and has at least sincemarriage been independent from any requirement of support by either parent andin particular, by their mother. I agree with the judgment of my colleague KlebucJ. in Ostrander v. Kimble Estate, [1996] 8 W.W.R. 336 (Sask. Q.B.), at 349:

... the Act contemplates a need maintenance approach. As a resultthe principles in Tataryn v. Tataryn Estate [[1994], 2 S.c.R. 807],while still applicable, must be applied with deference to the underlying legislative intent.

5 Ostrander, supra note 11 at para. 33. [Emphasis Added].6 (1999),179 Sask. R. 298 (Sask. Q.B.).


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A similar view was expressed by my colleague Dickson J. in Wilson v. Kosok,[1996] 9 W.W.R. 598 (Sask. Q.B.).

None of the applicants has demonstrated dependency within the meaning of theAct and subsection under discussion.7

While this is a very brief decision, it is suggested this illustrates that if an applicant is over the

age of majority, (in this case married) and has not been dependent on the deceased for some

time, then he/she is not a "dependant" as contemplated in the Act. Significantly, this case was

upheld on appea1. 8 The Court of Appeal was not satisfied that Dielschneider J. had erred in

applying the provisions of The Dependants' ReliefAct, 1996.

The principles in Ostrander and Tataryn were considered in the more recent (spousal) case of

Thronberg v. Thronberg Estate.9 Having reviewed the case law and referring to some of the

comments of Klebuc J. in Ostrander, the Court stated, "The principle that the Act not be used to

create an estate for the applicant's dependants [sic] is well-established in Saskatchewan law."!O

It is suggested that Thronberg further supports the fact that the Act is essentially about providing

maintenance and where maintenance is not needed, the individual seeking relief would not be

expected to be a dependant as contemplated in the Act.

C. Other Saskatchewan Cases

In Wilson v. Kosok!! Dickson, J. stated, "the purpose of the legislation is to provide maintenance

for the testator's dependants." This statement was in relation to the 1978 Act, which is similarly

worded to our current Act. Kosok was referred to, as noted, in the more recent case ofRe Mate.

7 Ibid. at paras. 19-21.8 Re Mate (2000), 199 Sask. R. 14.9 (2003), 231 Sask. R. 39.10 Ibid. at para 14. Note that this sentence is probably supposed to read "create an estate for the testator'sdependants."11 (1996), 146 Sask. R. 105.


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The applicable section of the previous Act stated:

iii) a child of the testator or an intestate, over the age of 18 years, who alleges oron whose behalf it is alleged that by reason of mental or physical disability he isunable to earn a livelihood or that by reason of need or other circumstances heought to receive a greater share of the estate of the testator or intestate than he isentitled without an order under this Act;

The Court in Kosok held:

It is difficult to accept Amanda's [the applicant's] plea that she is dependant uponher father's estate. She is an adult now, 19 years of age, employed and living onher own for the past 3 years. She enrolled in university last September butwithdrew in March of this year. She has a part-time job from which she earns

. $51.00 per month. She estimates her living expenses at $1,380.00 which shepresumably meets by using some of the proceeds from her father's life insurance.She does not allege any mental or physical disability that would prevent her fromearning her own livelihood. The only reason she puts forth for claiming a greatershare of her father's estate is her intention to return to university in September1996 or July 1997 for another 7 years. I find it difficult to conclude thatdependency arises upon her forming an intention to attend university for the next7 years. Even if she was now attending university I would have difficultyrecognizing dependency. She is a young person with the rest of her life ahead. Ifshe chooses to attend university, no doubt student loans are available....It is quiteclear that the legislature did not intend a person over the age of 18 suffering nodisability to have a claim for support against a living parent. Why then should Iconclude that the legislature intends such a person to have a claim for supportagainst the estate of a dead parent? Certainly the definition of dependant in TheDependants' Relief Act is somewhat wider than that in The Family MaintenanceAct. but for Amanda to come within that wider definition I would have toconclude that "by reason or need or other circumstances she ought to receive agreater share" of her father's estate. She may feel a need to avoid the debt shemight incur if she is obliged to borrow to finance her education. But can that beclassified as need contemplated by the statues? I think not. No othercircumstances are alleged that could lead me to the conclusion that she ought toreceive a greater share of her father's estate in the form of a maintenance award.


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An Interesting North West Territories Case

Lee Estate (Re/2 involved the claim of an adult son who was 62 years of age when his father

died. The testator bequeathed $3,000.00 to each of his two children and the residue of his Estate

to a woman with whom he had maintained a close and caring relationship (although not living

together in the same residence) for the last twenty years of his life. During his adult life the son,

who was gainfully employed, was able to purchase a house and a vehicle. In due course, the son

became permanently disabled and collected earned disability benefits from his employer's

insurance until 65 years of age. At the time of trial the son was 67 years of age and relying on

Old Age Security and CPP. At the time of his father's death, Lee was unable, by reason of

disability, to maintain full time or part time employment. At the time of his father's death he was

on a general public pension without looking to his father for support. The Court stated as

follows:

There is no "age cap" for applicants seeking relief under the Dependant's ReliefAct. ..As a child of any age may make application under the Act, it becomesdifficult to apply the terminology of the statute - "unable to earn a livelihood" to persons like the present applicant who are at an age when our society does notexpect them to "earn a livelihood" in the usual sense of that term. A person whohas been gainfully employed throughout his/her adult life and who has reasonablyand prudently provided for his/her retirement years by accumulating assets and/orpaying into a pension plan has, one could say, already earned his/her livelihoodfor those later years.

) 12 Lee Estate Re [2006] NWJJ No. 16

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E. Oosterhoffs Comment on the Support ofDependants

On page 814 of his text titled "Oosterhoff on Wills and Succession (5th ed.),,,13 Oosterhoffnotes

that one significant difference between the provinces is that some provinces limit the entitlement

of children to those under a specified age and older children that are unable to earn a livelihood

by reason of physical or mental disability, or, in some cases, other reasons such as economic

need. The provinces and territories that he lists as falling into this category include Prince

Edward Island, North West Territories, Yukon, Manitoba, Saskatchewan and Alberta. He goes

on to indicate that in the remaining jurisdictions all children of the deceased, of any age and

whether disabled or not qualify as dependants. The places that he lists under this latter category

include Newfoundland, New Brunswick, Nova Scotia and British Columbia. For these

provinces, financial need is often not a prerequisite, although he suggests that it is still an

important criteria. Other important criterion are considered to be assistance provided to the

deceased by the child, estrangement between the parties and the reasons assigned by the testator

for failing to benefit specific children.

F. The Role ofthe Public Guardian and Trustee (PGT)

The Public Guardian and Trustee receives many calls from lawyers regarding their role under the

Dependant's Relief Act. Please see Appendix 1 attached to this paper for the PGT directive in

this regard.

13 A. H. Oosterhoff, Oosterhoff on Wills and Succession: Text, Commentary and Materials 5th ed. (Toronto:Carswell, 2001).


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III. THE POWER8 OF ATTORNEY ACT

It is suggested that Elder Parents may utilize the provisions of The Powers ofAttorney Act, 2002,

8.S. 2002, c. P-20.3 to provide for the maintenance, education, or benefit of their dependent

children. As Section 15 of the Act specifically states that the use of a Power of Attorney must be

in the "best interests' of the grantor, and as "best interest' is typically seen as providing only for

the grantor, a specific provision was created in the legislation to allow the grantor to do this.

Section 16 of this Act, allows a property attorney to do this as follows:

16(1) Unless the enduring power of attorney that appoints the property attorneystates otherwise:

(a) a property attorney may provide for the maintenance,education or benefit of the grantor's spouse and dependentchildren, including the property attorney if the property attorney isthe grantor's spouse;

It is to be noted that there is no definition of "dependent" or "children" in this legislation;

however, it is suggested that the words "d~pendent children" refer to children that are at least

financially dependent irregardless of age. As the power is limited to property attorneys, it is

suggested that the legislation does not contemplate an Elder Parent utilizing a Power of Attorney

to attempt to grant power over the Dependent's "personal affairs" except to the possible extent of

housing or other decisions requiring the expenditure ofmoney

There may also be circumstances where a child, even though dependent, has the requisite

Capacity to execute a Power of Attorney to appoint a third party to look after his/her affairs. The

Act provides as follows:

4. Any adult who has the capacity to understand the nature and effect of anenduring power of attorney may grant an enduring power of attorney.


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The English decision of, K. (Re/4 stated that the grantor must comprehend the following to be

able to understand the "nature and effect" of granting an Enduring Power of Attorney:

1. The attorney will be able to assume complete control over the donor's affairs,

if that is within the terms ofthe power.

2. The attorney will in general be able to do anything with the donor's property

that he himselfcould have done, if that is within the terms ofthe power.

3. The authority will continue if the donor should be or become mentally

incapable.

4. If the donor is, or becomes, mentally incapable, the power will be irrevocable

(in the sense that one's power to revoke is lost on becoming incapable)

without confirmation by the Court.

IV. THE HEALTH CARE DIRECTIVES AND SUBSTITUE HEALTH CAREDECISIONMAKERS ACT

An Elderly Parent has authority to make health care decisions (treatment for a medical, palliative

or preventive purpose) for a Child who does not have capacity to make decisions as the Child's

"Nearest Relative". This assumes the Child does not have a spouse or person with whom they

have cohabited as a spouse (in a relationship of some permanence) or an adult son or daughter

with capacity.

14 Re K [1998] 1 ch. 310 @ 315.


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V. THE ADULT GUARDIANSHIP AND CO-DECISION-MAKING ACT

In some circumstances, an Elderly Parent may want to bring an application to be appointed as

Guardian or Co- Decision maker of the Dependant, pursuant to The Adult Guardianship and Co

decision-making Act, S.S. 2000, c. A-53. The Dependant must lack capacity, as defined in the

Act, to make either personal or property decisions. Capacity is defined as follows:

2 (c) "capacity" means the ability to:(i) understand information relevant to making a decision; and(ii) to appreciate the reasonably foreseeable consequences of

making or not making a decision

Please note that by virtue of Section 3(b) adults are presumed to have capacity

There are three types of decision-makers created by the legislation:

1. property/personal guardian;

2. property/personal co-decision maker; and

3. temporary guardian - if immediate appointment is necessary to protect the adult from

serious mental or physical harm (personal) or to protect the adult's estate from serious

damage or loss (property).

Personal guardians/co-decision makers can potentially make/co-decide the following decisions

(s. 15):

• where the adult Dependant is to live;

• who the adult Dependant is to associate with, and who should have access to the adult

Dependant;

• whether the adult Dependant can engage in social activities, and to what nature and

extent;

• whether the adult Dependant can work, the nature and extent;

• whether the adult Dependant can participate in any educational, vocational or other

training;

• whether the adult Dependant can apply for a licence;


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• subject to the powers of any litigation guardian, decisions respecting the carrying on

of any legal proceeding that does not relate to the adult Dependant's estate;

• subject to The Health Care Directive and Substitute Health Care Decision Makers

Act, S.S. 2000, c. H-O.OOI decisions respecting the adult Dependant's health care,

including decision respecting admission to a health care facility or respecting

treatment of the adult Dependant;

• subject to the regulations, decisions respecting the restraint of the adult Dependant's

movement or behavior by the use of a device, medication or physical force, where

necessary to protect the health or safety of the adult Dependant or others;

• decisions respecting the adult Dependant's diet, dress grooming, hygiene and other

matters of daily living; and

• decisions respecting any other matters specified by the court.

A property guardian has the authority to do anything respecting the adult's estate that the adult

could do if he or she had capacity to make reasonable decisions relating to his or her estate (this

does not include the power to make a will (s. 43)).

Guardians have the authority to make decisions on behalf of the dependent adult. Co-decision

makers, on the other hand, have the authority to assist the dependent adult in making decisions

and to make joint decisions with the adult. Pursuant to sections 17(1) and 42(1), the co-decision

maker must ensure that the adult has and understands all the information required to make a

decision and knows the alternatives and likely results of any decision.

The Guardianship legislation indicates that a Health Care Directive has priority over a personal

decision-maker's decisions, and that a personal decision-maker does not have the authority to

make the following decisions (s. 22(4)):

• consent to the withdrawal of life-support systems;

• consent to live organ donations;

• consent to the sterilization of the Dependant adult, unless it is part of a medically

necessary procedure;

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• consent to have an abortion, unless the continued pregnancy would threaten the life or

health of the Dependant adult;

• consent to the termination of the parental rights;

• commence divorce proceedings

• interfere with religious practices, unless they threaten health or safety

A personal guardian or temporary personal guardian must apply to the court for an order

authorizing any of the matters mentioned in Section 22(4).

A. Appointing a Decision Maker for your Dependent Child in Your Will

If a parent of a Dependant has been appointed by the court as a "decision maker", pursuant to

section 64, they may name in their will the person they would like to take their place as "decision

maker" after their death (section 64). This is referred to as a testamentary appointment and must

be confirmed by the court within six months of the death of the parent. If an application is not

) made within six months, the Public Guardian and Trustee (PGT) may be appointed as "decision

maker" (section 64(8)). If the testamentary appointment is for a property decision maker, the

"PGT" must be notified immediately.

This process can give parents a level of certainty that their selected testamentary "decision

maker" will have control for at least six months after their death, provided the nomination is

unchallenged by other interested parties, including the PGT (s. 66).

Alternatively, the parents could discuss their intention with their chosen "decision-maker", and

name that person in their will, (similar to naming a guardian for minor children). On the death of

the parents, the person named to be a decision maker can apply to the court to be appointed. This

nomination by the parents, though not conclusive, may be considered persuasive.


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B. Preserving the Elder Parent's Testamentary Intent

If an Elder Parent lacks capacity to alter his/her Last Will and Testament it may be necessary to

apply to court for the Elder Parent's guardianship to preserve their testamentary intent. Section

61 of the Act provides as follows:

61(1) The adult and the adult's heirs, executors, administrators, next of kin,devisees, legatees and assigns have the same interest in proceeds of any sale,mortgage or other disposition of real property that they would have had in theproperty if no sale, mortgage or other disposition had been made.

(2) Any surplus proceeds from the sale, mortgage or disposition of propertymentioned in subsection (1) are deemed to be of the same nature as the propertysold, mortgaged or disposed of.

(3) The court may direct that any proceeds identified III this section bemaintained by the property guardian in a separate account.

This section is particularly useful if there is a specific gift of real property in an Elder Parent's

Will and the property must be liquidated for some reason. This section will preserve the nature

of the gift in the Elder Parent's Last Will and Testament.

VI. BENEFITS, ASSISTANCE AND OTHER PLANNING ISSUES

Understanding the type of benefits and assistance the Dependant receives, or is entitled to

receive, is another important consideration. These matters need to be analyzed in conjunction

with the assets the Dependant has or may receive through a will, or an inter-vivos trust, RRSP,

life insurance and/or annuity.

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Some of the possible benefits and assistance available are:

• social assistance premiums

• worker's compensation

• employment insurance

• compensation from a personal injury judgment

• a housing supplement

On the Elder Parent's death, their Dependant may be entitled to:

• CPP child benefit

• Disability pension

• Other - consider, for example, veterans payment

VII. THE SASKATCHEWAN ASSISTANCE ACT AND THE SASKATCHEWANASSISTANCE REGULATIONS R.S.S. 1978 c. S - 8

The type and amount of social assistance received is based on a simple formula, described in The

Saskatchewan Assistance Regulations, SR78/66:

Needs - Resources = Monthly Allowance

Items of basic maintenance, special need, health care services and welfare services are included

in the term "Assistance". Effective planning can minimize the effect of a bequest on the

"Resources" factor in the formula. Therefore, the Dependant continues to be eligible to receive

assistance and their quality of life remains constant and potentially improved.

The Saskatchewan Assistance Regulations (Section 28(1)) definejinancial resources as:

The net amount of all income, allowances, pensions, revenue from business orfarming operations, regular gifts, honoraria and gratuities whether in cash or inkind, attributed value of free shelter, free board, free lodging and any other assets,but does not include honoraria paid by the department.


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Reference should be had to section 28(2) of the Regulations for a list of resources that are not

included in the calculation offinancial resources. Some examples of resources that do not affect

the calculation of financial resources are:

(b) casual gifts up to $200/year

(c) contributions other than for ordinary maintenance to recipients or

members ofhis family who require special care

(c. 1) capital and income from a trust established under s. 9 of The Dependants'

ReliefAct

(e. 1) investment income up to a maximum of $1 OO/year

(g) the home in which the person resides

(P) if eligible for assistance before April 30, 1984 and is continuously eligible

to date, $2,500.00 in cash and liquid assets

(p.1) if eligible after May 1,1984 and is continuously eligible to date, $1,500.00

in cash and liquid assets

(q) the cash surrender value of any policy of life insurance but not the amount

of any benefits paid pursuant to a policy of life insurance during the

lifetime of the policy holder

(cc.1) total of amounts given in a will up to $1,500

Thus, an inheritance would usually be limited to $1,500.00. It should be noted, however, that the

Regulations also provide:

28(5): Where a person resides in a home that was acquired by inheritance, thevalue of the home is excluded from the calculation of financial resources, for thepurposes of clause [28](2)(g) and is not included in calculating the amount set outin clause [28](2)(cc.1)


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The Regulations (section 29) list the resources to be used in calculating the value of a

Dependant's Resources, and their entitlement to social assistance. Resources that are

characterized as income include the following:

(4) Income from Insurance

(6) Inheritances or bequests

(7) Income from individuals, benevolent organizations, other agencIesdesigned to meet basic needs are considered to be income; if thecontributions are made regularly or in amounts in excess of $25 they shallbe considered income whether or not they are designed to meet basicneeds.

(8) Maintenance payments from monies held III trust and available fordistribution shall be considered as income

The following are Resources that are considered assets:

(1) Liquid Assets

(i) Except as provide in section 28(2) all assets that can beconverted into cash within 90 days shall be considered aresource provided that the unit administrator believes thatthe recipient has a bona fide and sound social or economicreason for delaying or refraining from converting such assetinto cash

(ii) monies held in trust for children shall not be considered anasset if they are not available for distribution or ifmaintenance payments are being made in accordance withsection 29.A.8.

(2) Real Assets

(i) real property used for a business or farming operation shallnot be considered a capital resource but income will becalculated there from

(ii) all other real property shall be considered a resource whichmight be used as security for funds or sold for funds


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Provided that the recipient has 90 days to realize on theasset and that if the unit administrator believes that therecipient has a bona fide and sound social or economicreason for delaying or refraining from converting such assetinto cash it need not be considered a resource.

It is possible to increase the quality of life of a Dependant receiving social assistance who is a

beneficiary in a will without affecting eligibility. Many parents may assume that little, or

nothing should be left to the Dependant because their needs are met by the state. This

assumption has risks. Government funded programs may change or be discontinued. This may

have an impact on the Dependant's quality of life. In addition, an interested party or the PGT

could bring an application under The Dependants' ReliefAct to vary the will, which may have an

impact on the distribution of the estate.

The Saskatchewan Court of Appeal considered the competing claims of a dependent child and a

dependent widow in the case of Deis v Deis (1983) 21 Sask. Reports 328. The deceased died

intestate with a net estate of $108,000.00. On intestacy this would be distributed $68,000 to the

respondent widow and $15,000 to each of the adult children. The 33 year old dependent adult

child was being maintained by the Province, by the Department of Social Services and the

budget of Valley View Centre where he resided. The difficulty in the case was that the Estate

was not sufficient to satisfy the needs of the widow. The judgment of the court was delivered by

Hall, J.A. who stated at page 335:

As noted by the chambers judge, the necessities of life are presently beingprovided for Stanley. No doubt, he has certain requirements, in addition whichmay not be provided. If the substantial portion of the Estate is not required to keepthe respondent during her lifetime, Stanley would have a claim upon theremainder as her dependent. I think, therefore, that it would be reasonable, justand equitable, in the circumstance, that the appellant be awarded the sum of$5,000 on behalf of Stanley and that the balance of the estate of the deceased goto the respondent.

ELDER LA W 2006: UNDERSTANDING ANAGING POPULATION~ The Elder Parent with a Dependent September 2006

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In Hawker v. Hawker Estate (1981),8 Sask. R. 433,(QB) at p. 435 the court stated the following:

It is now settled law in this province that the Dependants' Relief Act recognizesthat it is the moral duty of the testator to make adequate provision for the propermaintenance and support of a dependent child of whatever age who, by reason ofmental infirmity, is unable to maintain and support himself, even though his needshave to be provided by the state or he is a patient in a provincial institutionmaintained by the province.

The Saskatchewan Court of Appeal considered the competing claims of a dependent child and a

dependent widow in the case of Deis v Deis (1983) 21 Sask. Reports 328. The deceased died

intestate with a net estate of $108,000.00. On intestacy this would be distributed $68,000 to the

respondent widow and $15,000 to each of the adult children. The 33 year old dependent adult

child was being maintained by the Province, by the Department of Social Services and the

budget of Valley View Centre where he resided. The difficulty in the case was that the Estate

was not sufficient to satisfy the needs of the widow. The judgment of the court was delivered by

Hall, I.A. who stated at page 335:

As noted by the chambers judge, the necessities of life are presently beingprovided for Stanley. No doubt, he has certain requirements, in addition whichmay not be provided. If the substantial portion of the Estate is not required to keepthe respondent during her lifetime, Stanley would have a claim upon theremainder as her dependent. I think, therefore, that it would be reasonable, justand equitable, in the circumstance, that the appellant be awarded the sum of$5,000 on behalf of Stanley and that the balance of the estate of the deceased goto the respondent.

In Hanofski (Public Trustee of) v. Hanofski Estate, [1985] S.l No. 244 (QB) the testator divided

her estate, valued at $42,054.00, equally between her eleven adult children. One of her children

lived in a group home and received social assistance. The PGT applied to have the entire estate

awarded to that child. The court awarded $10,000, suggesting that in most similar circumstances,

a dependant child had been awarded approximately 25% of the estate.


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VIII. THE USE OF TRUSTS

On the death of an Elder Parent, a trust may be used to increase the quality of life of a

Dependant. If this is done with care, the Dependant will remain eligible to receive social

assistance. Two common types of Trusts that can be used for this purpose are:

1. "Section 9 Trust" - a trust created under section 9 of The Dependants ReliefAct

2. A Discretionary/"Henson" Trust

A. Dependant's ReliefAct Trust

An interested party, or the PGT, can apply to the court on behalf of the Dependant to establish a

trust under The Dependants' Relief Act ("DRA"). Please note that the application can only be

made to the court for a child who is 18 years of years or older and meets the criteria of being a

"dependant" under the Act.

The Saskatchewan Assistance Regulations (Section 28(2) (c.1)), supra, and section 9 (4) of the

DRA, provide that the capital and income of a section 9 trust are not included in determining the

dependant's eligibility for assistance. This trust is used to enhance the quality of life of the

Dependant and is not to be used for maintenance. The Dependants' Relief Act, states the

following at section 9:

(2) Subject to subsections (3) to (7), the court may order the establishment ofa trust fund for a dependant for the purpose of paying an allowance;

(a) to help the dependant achieve independence;

(b) to meet the special needs of the dependant;

(c) to provide occasional gifts to the dependant; or

(d) to do all or any combination of the things mentioned inclauses (a) to (c)


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The Dependants' Relief Trust Fund Regulations, 1997 D-25.01 Reg 1, stipulate that a trust fund

) established pursuant to s.9 (2) is not to exceed $100,000.00.

When deciding the amount of the trust fund, the court is directed to consider that the amount and

type of assistance provided the Dependant by Saskatchewan assistance or like Sk. programs will

continue. (s. 9(3)). The PGT may be appointed, with consent, as trustee for the trust fund ifthere

is no other suitable person (s. 9(5)).

In Penner (Re), [1997] S.J. No. 832 (SK QB) (QL), the testator had three children, one of whom

was disabled, 46 years of age, lived in a group home and received social assistance. The testator

left all of her estate ($87,000.00) to a religious organization. The dependant's siblings applied

under The Dependants' ReliefAct to have a s. 9 trust fund established for their disabled sister.

McIntyre J. varied the testator's will and established as. 9 trust for the dependant using the entire

value of the estate. The court stated:

[9] Section 9 is a new provision. A trust fund established under section 9 is topay an allowance for the specified purposes set forth in s. 9(2). But for theprovisions of a s. 9 trust fund, if a maintenance order was made under s. 6of the Act questions may arise as to whether the capital or income undersuch an order would be considered an asset or income of the dependant forthe purposes of public assistance. The purpose of a section 9 trust fund isto enhance the dependant's quality of life without affecting theirentitlement to public assistance.

[11] I am also of the view that section 9 was enacted so that the estate of theparents of the dependant adult need not necessarily be used in its entiretyto support the dependant adult after the parents have died. It is designatedto provide a mechanism whereby reasonable provisions can be made toenhance the quality of life of the dependant adult.

B. Discretionary Trust ("Henson Trust'')

Where a parent wishes to provide for a Dependant in their will, a discretionary trust can be set up

to benefit the Dependant without affecting his or her entitlement to social assistance.

)


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It is important to gIve a good deal of thought to the Trustee(s) to be named and the life

expectancy of the Dependant.

The benchmark case for determining the effects of discretionary trusts on social assistance

eligibility is Ministry o/Community and Social Services v. Henson (1987), E.T.R. 121 (Ont. Div.

Ct.), affd (1989), 36 E.T.R. 192 (Ont. c.A.). In Henson, a disabled adult was the beneficiary of

a trust valued at $82,000.00. She could not compel the trustees to pay her because the trustees

had absolute and unfettered discretion as to the disposition of the capital and income of the trust.

The will provided that no part of the estate vested in the daughter and her only interest was in the

payments actually made to or for her. On the death of the disabled adult, or, if accumulations

continued for too long a period of time, the residue or accumulations, as the case may be, were to

be transferred to a charitable organization. At issue was whether the trust prevented the disabled

woman from receiving social assistance. The relevant legislation disqualified single disabled

persons from receiving benefits if they had liquid assets valued in excess of $3,000.00. The

court held the disabled adult did not have a beneficial interest in the trust assets and her interest

could not be characterized as liquid. Therefore, the disabled adult remained eligible for social

assistance.

In Donald Estate v. Donald (Litigation Guardian oj), [2005] S.J. No. 490 (SK QB), the PGT

sought to vary a trust to increase the executor's power allowing for absolute discretion. This

would allow the 45 year old son to continue to receive social assistance and the trust could be use

to enhance his quality of life. The deceased was predeceased by her husband. By the deceased's

will, her farm lands were to be held in trust for her only son, Wesley, "for the sole use and

benefit of my said son for as long as he shall require the same.". The Executor of the estate

argued that Wesley did not require social assistance benefits. Currie, J. held that the testator's

intention was to leave everything absolutely to her son, and that the creation of a trust was to

assist him in managing the farm land. The trust could not be varied because it did not appear to

benefit the son and the court was not convinced that the proposed variation was fit, having regard

to the circumstances.


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The Donald case emphasizes the need to carefully review the Elder Parents intentions when

) drafting their will. It is suggested that a specific note be made on your file if an Elder Parent has

declined to utilize a Discretionary Trust. It is also wise to keep in mind that The Variation of

Trusts Act RSS 1978 Chapter V-I may be successful in anther case in which a trust is sought to

be varied for the benefit of a Dependant.

IX. SOME INCOME TAX ACT CONSIDERATIONS: EFFECTS ON ESTATE,CHILD, GUARDIANS

A. Testamentary Trusts

The holders of RRSPs, RRIFs and life insurance policies often name a beneficiary for the

proceeds available at the time of their death. Parents may think it best to name a child as the

beneficiary if they want the child to benefit from these assets. However, depending upon the

value of the funds to be received by such child, it may be beneficial to have the assets held for

the child in trust.

A testamentary trust can be established through the parent's will to hold funds that are to be

distributed to the child. All trusts, including testamentary trusts, are taxed under the Income Tax

Act (Canada) ("ITA") as a separate individual. 15 To the extent that income is distributed to

beneficiaries of the trust, the income is deducted from the income of the trust and is taxed in the

hands of the beneficiaries. 16 Therefore, a trust can either retain and pay tax on the income itself

at its own rate or distribute the income to beneficiaries for the beneficiaries to pay tax based on

their respective rates. However, a special tax benefit exists with respect to testamentary trusts.

Testamentary trusts, unlike inter vivos trusts, have their own set of graduated tax rates, which

creates an opportunity to split income between the trust and the child.

) 15 Income Tax Act (Canada), SS. 104(4).16 ITA, Ss. 104(6) and 104(13).


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As discussed in the previous section, a properly created discretionary testamentary trust can

provide additional benefits when planning for a Dependant. Such a trust can be used to increase

the Dependant's financial wellbeing while avoiding a reduction to such Dependant's social

assistance. Dependants often have low, if any, taxable income because social assistance

payments are generally not taxable. 17 Therefore, it is unlikely that any income received by the

Dependant from the trust would result in a tax liability, especially when one considers the tax

deductions and credits often available. However, one must be careful if taxable income does

result because a payment by the trust of the tax obligation may be considered a maintenance

payment and jeopardize the Dependant's social assistance benefits. Therefore, the trustee may

wish to consider working with an accountant to determine the appropriate level of distributions

to the Dependant.

B. RRSPS and RRIFS

When the annuitant18 of an RRSP or a RRIF dies, the general rule is that the annuitant is deemed

to have received as income, immediately before death, an amount equal to the value of the RRSP

or RRIF.19 The beneficiary of such RRSP or RRIF will not have to pay tax on any amount of the

RRSP or RRIF that was included in the deceased annuitant's income. This general rule can

result in the estate having a considerable tax liability on the death of the annuitant.

Preferential tax treatment is available when the beneficiaries of an RRSP or RRIF under the

annuitant's estate are certain individuals, such as a child or grandchild who was financially

dependeneo on the deceased annuitant.21 In such a situation, the proceeds of the RRSP or RRIF

may be transferred to an RRSP of the child or may be used to purchase an annuity for the child

on a tax-free basis. If the dependent child was not physically or mentally infirm but was under

the age of 18, the term of the annuity must not exceed 18 years minus the age of the child at the

17 ITA, Para. 81(1)(h).18 Ss. 146(1) of the ITA defines "annuitant" to essentially mean the person for whom the RRSP or RRIF is toprovide a retirement income.19 ITA, Ss. 146(8.8) and 146.3(6).20 In determining financial dependency, there is a rebuttable presumption under ITA, ss. 146(1.1) that a child wasnot financially dependent on the annuitant if the child's income for the taxation year previous to the annuitant'sdeath was greater than the sum of the basic personal exemption and, if eligible, the disability tax credit for that year.21 ITA, Ss. 146(1) - definition of "refund of premiums", 146(8.9), 146.3(6.11) and 60(1).


- 27-

time the annuity was purchased (a "minor term annuity"). If the child, regardless of age, was

) dependent upon the annuitant by reason of physical or mental infirmity22, the annuity may be for

the life of the child (with or without a guaranteed period) or for a fixed term equal to 90 years

minus the age of the child (a "life annuity").

To obtain the benefit of this rollover, the deceased annuitant's estate and the child must jointly

elect under subsection 146(8.1) (for RRSPs) or 146.3(6.1) (for RRIFs) to have the proceeds from

the RRSP or the RRIF deemed to be received by the child rather than estate. Paragraph 60(1)

allows the child to claim an offsetting deduction provided the proceeds are used to purchase an

RRSP or annuity for the child.

The annuity option would clearly be more conducive to providing ongoing assistance to the

Dependant. However, the regular proceeds from the annuity would reduce the level of social

assistance available to the Dependant. The solution to this dilemma is to have a trust as the

annuitant. There is a proposed amendment to the ITA dated July 18, 2005 in this regard that will

allow this if certain specific requirements are satisfied.

The proposed section 60.011 allows a trust to be named as the annuitant under a minor term

annuity or a life annuity. This provision prevents the paragraph 60(1) deduction from being

denied in situations were the Dependant is not the annuitant, which is obviously the case when a

trust is the annuitant, or the annuity is acquired by the trust or estate of the deceased rather than

"by or on behalf of the taxpayer".23 However, subsection 60.011(3) only applies to "qualifying

trust annuities". For a "qualifying trust annuity" to exist with respect to a life annuity acquired

after 2005, the trust that will be the annuitant must be a "lifetime benefit trust".24 For a trust to

qualify as a "lifetime benefit trust" the following conditions must be satisfied:

• The taxpayer must be a child or grandchild of the deceased individual and have beendependant on the deceased individual for support because ofmental infirmity

• The trust is a personal trust

)

22 Appendix "A" to Interpretation Bulletin IT-513R, dated February 24, 1998, "Personal Tax Credits", contains anexplanation of the meaning of "mental or physical infirmity".23 ITA, Ss. 60.011(3).24 ITA, Para. 60.011(2)(a).


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• No person other than the taxpayer may receive or otherwise obtain the use of, duringthe taxpayer's lifetime, any ofthe income or capital of the trust

• The trustees must be empowered to pay amounts from the trust to the taxpayer• The trustees must be required to consider the needs of the taxpayer (including the

comfort, care and maintenance of the taxpayer) in determining whether to pay, or notpay, an amount to the taxpayer25

It is important to note that the first condition excludes the physically infirm. One must take care

to ensure that the remaining conditions are clearly satisfied by the wording of the trust deed.

The benefit provided by section 60.011, if all the conditions are satisfied, is a tax-free rollover of

the RRSP or RRIF to a testamentary trust for the Dependant. This provides significant tax

savings and deferral. However, one must consider the effect on the dependant's social

assistance. The conditions under section 60.011 limit the ability to create a discretionary trust by

requiring the Dependant to be the only person entitled to receive income or capital from the trust

during the Dependant's lifetime. However, the testator can still specify who, upon the death of

the Dependant, is entitled to receive the funds remaining in the trust. The trustees should also be

given the discretion to determine what amounts are to be distributed to the Dependant. However,

for the conditions under section 60.011 to be satisfied, the trust deed must require the trustees, in

exercising such discretion, to consider the needs of the taxpayer, including maintenance of the

taxpayer. Query whether or not this requirement will be sufficient to cause a reduction in the

Dependant's social assistance.

25 ITA, Ss. 60.011(1).


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C. Life Insurance

On the disposition of an interest in a life insurance policy, the policyholder is required under

paragraph 56(1)(j) and subsection 148(1) of the ITA to include in income the amount to which

the proceeds of disposition exceed the adjusted cost base of the policy. The policyholder must

do so even though the proceeds will be received by a beneficiary. However, paragraph 148(9)(j)

excludes from the definition of "disposition" payments made in the consequence of death under a

life insurance policy that is an exempt policy. 26 Assuming the life insurance policy is an exempt

policy, subsection 148(1) will have no application and therefore no amount would be included in

the policyholder's income in respect of the benefit received by the beneficiary.

As with RRSPs and RRIFs, parents who are wishing to benefit a Dependant through their life

insurance policies should consider naming their estate as the beneficiary under the policies and

establishing a discretionary trust to hold any portion of the insurance proceeds that are to benefit

the Dependant. The discretionary nature of the trust, if properly drafted, will prevent the

insurance proceeds from being considered by social assistance. Also, the trustee will be able to

distribute the income and capital of the trust to the Dependant over time and thereby prevent or

reduce any reductions to the Dependant's social assistance.

) 26 "Exempt policy" is defined under Regulation 306 of the Income Tax Regulations (Canada).


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D. Deductions and Credits

The following chart summarizes possible applicable tax deductions and credits available to either

the child, the parents or the guardians.

What Section Who Mechanics

Deductions

Prescribed s.20 Taxpayer who made Applies to disability related renovations madeRenovations (l)(qq) renovations may to a building used to produce business/property

claim deduction. income. Renovations must be those prescribedby Reg.8800.

Prescribed s.20 Taxpayer who The amount paid for any equipment/deviceDevices & (1 )(rr) purchased prescribed by Reg.8801 may be deducted fromEquipment equipment may business/property income.

claim deduction.Disability s.64 Only a person with Amounts paid in the year for attendant careSupports a disability who provided to enable taxpayer to earn any of theDeduction qualifies for the types of income mentioned subject to

disability tax credit limitation.may claim This credit cannot be deducted if it wasdeduction. claimed (for any taxation year) by the taxpayerA supporting person or another person as a medical expense foror spouse may not purposes of the Medical Expense Tax Credit,claim the deduction. s.118.2

CreditsPersonal Tax CreditsZ7

Equivalent to s.118 An individual who "Related" = individuals connected by bloodSpouse (l)B(b) doesn't claim a relationship, marriage or adoption.Credit (ETS spousal tax credit and [s.251(2)(a)] Also note rules in ss. 251(6),Credit) was single, or and s. 252.

separated and not An individual cannot claim for more than onesupported by their person in a taxation year. It cannot bespouse, who supports claimed by more than one individual for thea wholly dependent same person or for the same residence.related person in their The ETS Credit can only be used once inhome may claim this regards to an individual. Also, if thecredit. dependant's spouse has claimed the amount

under (l)B(a) [spousal amount] an amount

27 See also IT-S13R, Personal Tax Credits.


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cannot be claimed under this subsection too.[s.118(4)(a),(a.1 ),(b)]If a taxpayer is entitled to the ETS Creditthey cannot claim the caregiver or dependantamounts from s.118(1 )B(c.1) & (d) but maybe able to claim the additional amount in (e).[s.118(4)(c)]

Caregiver s.118 An individual who An individual cannot claim this credit for aCredit (1)B(c. resides with a related person if they are entitled to claim the

1) adult individual, equivalent-to-spouse tax credit regarding thedependent on them same person [s.118(4)(c)].due to mental or The caregiver and dependant amounts can bephysical infirmity, claimed by more than one taxpayer howevermay claim this credit. they can only be claimed to such that when

combined they total the maximum allowed ifclaimed solely by one taxpayer. [s.118(4)(e)]

Dependant s.118 An individual who "Dependant" defined in s.118(6) as child,Amount (1)B(d) supported an adult grandchild, parent, grandparent, brother,

dependant may claim sister, uncle, aunt, niece, or nephew of thethis credit. taxpayer or their partner. It does not include

a guardian relationship.An individual can claim this credit for eachperson they supported in a taxation year.An individual cannot claim this credit for aperson if they are entitled to claim theequivalent-to-spouse tax credit regarding thesame person [s.118(4)(c)].An individual cannot claim this credit for aperson if they are entitled to claim theCaregiver Credit regarding the same person[s.118(4)(d)].

Additional s.118 A taxpayer entitled to Paragraph 118(4)(c) disentitles a taxpayer toAmount (1)B(e) the amounts in (b), (c. 1) or (d) if they are also entitled to the ETS

(c. 1), andlor (d) may Credit under (b). Under subsection (l)B(e)claim this credit. the taxpayer is entitled to the amount by

which (c.1) or (d) exceeds (b).Limits on s.118 See each of above credits.Personal (4)Credits s.118 An individual cannot claim credits regarding an individual where they

(5) must make support payments to their former spouse or common-lawpartner in respect of that individuaL

Medical s.118.2 Any taxpayer with I Qualifying medical expenses, as listed inExpense (1),(2) sufficient qualifying subsection (2) must have been paid or deemed


- 32 -

Credit medical expenses to have been paid by either the individual or(MEC)28 made for his or her legal representative within the tax

themselves, their year.partner, or a **Note: (2)(a) defines patient for thedependant may subsection as the individual or their spouse orclaim the MEC. a dependant, as defined in s.118(6), on whose

behalf the medical expenses are paid.Dependant is defined as child, grandchild,parent, grandparent, brother, sister, uncle, aunt,niece, or nephew of the taxpayer or theirpartner. It does not include a guardianrelationship.

Disability s.118.3 The disabled person The DTC may not be claimed if nursing homeTax Credit (1)-(4) may claim the DTC. care or attendant expenses is included as a(DTC) Any unused portion qualifying medical expense under s. 118.2 in

of the DTC may be calculating a medical expense tax credittransferred under [s.118.3(1)(c)].subsection 118.3(2) If a spouse of a disabled person claims anyto the "supporting non-refundable tax credit for the disabledindividual" if the person under section 118 or 118.8, a thirdconditions outlined person will not be entitled to transfer a DTCare met. If more from the disabled person for the same year,than one person is even if that third person qualifies as aentitled to the "supporting individual" of the person with aunused portion in disability [s.118.3(2)].respect to the same An impairment must be prolonged, and it mustperson the amount markedly restrict the individual's ability tomust be divided perform a basic activity of daily living but-forbetween the two. therapy. These requirements are delineated in

s.118.4(1 ).See also s.118.4(1) for further delineation ofthe scope of coverage.

Education s.118.6 Available to Disabled students do not need to be enrolledCredit- (3) disabled students. full-time to receive the education credit.DisabledStudentsRefundable s.122.5 Available to The taxpayer must be an adult and must alsoMedical 1 working individuals make a claim for the medical expense taxExpense with low incomes credit or the disability supports deduction.Supplement and high medical

expensesHome Buyers s.146.0 RRSP holders. An individual may withdraw up to $20,000Plan 1 (1) from RRSPs to buylbuild a qualifying home

for themselves or for a specified disabled

28 See also IT-519R2 Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction.


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Ip~son.


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X. APPENDIX 1

APPENDIXl

TO: Notice to the ProfessionFrom The Public Guardian and Trustcc

March 22,2006

The Dependants' ReliefAct, 1996

Our Office receives many calls from lawyers regarding The Dependants' Relit/Act, /996 (''Act'')and its application. This document summarizes the positions taken when inquiries arc made.

ApllIication for Administration

In the application for probate or administration, Rule 699(2) of The Queen's Hench Rulesrequires the applicant to specify those who are dependent adults. The definition of"dependcntadult" in Rule 6Xl)(h} III effect requires the lawyer to list dependellt adults who have a disabilityand who have a property guardian. We suggest that the Notice should specify anyone who is adependent adult whether he or she has a property guardian or nol.

Ucpcndants' Relief Claim

When we receive a Notice that shows a dependent adult without a propeny guardian, our GUicewill write the estate lawyer and indicate that thc dependent adult may have a dependants' reliefclaim and may need to be repn:sentcd. We request the estate lawyer to assist us in gelling theperson represented by a properlY guardian or litigation guardiml. The Public Guardian andTmstce will 110\ represent the person unless it has the authority eilher as property guardian or aslitigation guardian. The fIrst preference is fl)r a family member, with no eonfliel of interesi, to bethe property !,'Uardian or litigation guardian. Failing this, the Public Guardian and Twstec willattempt to become appointed as property guardian or litigation guardian.

[fthe Public Guardian and Trustee is not a propel1y guardian or liligation guardian, the PublicGuardian and Trustee will not negotiate a settlement because it has no authority 10 act on behalfof the dependent adult until appointed. Also, at the early stages, the Public Guardian and Trusteedocs not have all the facts to fonl1ulatc an opinion as to what would be a reasonable settlemenl.

[f a property guardi<lll has already been appointed, the property guardian should not act if aconflict of interest exists. In those circumstances, a litigation guardian needs to be appointed.

If appointed, tht: Office will apply the following policit:s:

1. [f the tcslator"tlas gi fled all or substantially all of the estate to his or her adult children,then tne dependent adult should, 11!..!!linimum, receive an equal share with his or hersiblings

2. The Act and l:ase law indicate that a dependent adult's needs arc critical in detcnniningan award or settlemenl. [ftlle estate IS over SIOO,OOO, we will engage a qualified healthprofessional (possibly an occupational therapist) to conduct a needs assessment. We willalso lhen attempt to obtain a rcpoll Oil present value for the future costs of care. ThePublic Guardian and Trustee will ask the executor or administrator to pay for bothreports. Unless the needs assessment supports a larger claim, the minimum claim will bea share equal to what other brothers and sisters are receiving under the Will. If the needsassessment is higher, then the higher amount will be claimed.


)

- 35 -

2

The Act and easc law also cnumerate other factors to be considered in quantifying aGlaim, and wherc applicable. these factors would also receive consideration (See forexample, scction &of the Act).

3. If the estate is under $100,000, the depcndent adult should receive an equal share with hisor her siblings. If the Will provides less than an equal share, we will claim an amountthat results in an equal sharc to the dependent adult.

4. If the dependent adult is the only child of the deceased parent and the Will providesothers with a share of the estate, our Office will employ a needs-based test to detemlinethe adequacy of the dependent adult's bequest. This approach will also be used where thelestator has disinhclited the adult childrcn.

5. Once a settlement is reached, attempts will be made to put the funds in a section <) trustunder the Act (current limit by regulation is $100,000) with our Office as trustee. Thepurpose of a section 9 trust lund is to en.hance the dependent adult's quality of lifewithout affecting his or her eillitlement to social assistance. Upon the dependent adull'sdeath, the residual bencficiaries of the trust are the same people who would take underthe Will or Intestate Succession Act.

If thc settlemenl exceeds $100,000 and a discretionary trust also exists under the Will, thecxcess will be placed in the discretionary trust. The Public Guardian and Trustee will bcthe trustee under the section 9 trust and the executor/trustee will be the trustee under thediscretionary trust. The variation of the discretionary (nlst may be accomplished byagreement or possihly an application under The Variation o/Trusts Act. Consent orderswill be required under The Oependants' Relie/Act and nrc Variation o/Trusts Act. Ofcourse, all consent orders arc subject to the approval of the court. .

"rafting Wills

v,'!1cn drafting a will for parents who have a dependent adult with l~ disability, it is necessary toconsider the following:

• Is the dependent adult rcceiving an equal share under the \ViII similar to the othersiblings'l

• Will the dependent adult's share mect his or her needs for his or her expectedIifcli!lle~

Can his or her share be set up in a discretionary trust so that it is protected fromfinancial abuse'!

The Office encourages the use ofdiscretionary lrusts. These trusts are not limited to the$100,000 cap as is required !()r section 9 trusts. A. discretionary trust can be for any amount.Case law indicates that social assistance payments cannot be reduced because of the existence ofa discretionary tnlst. If the exccutor/tmstee will havea perceived conflict, then someone e1scshould bc appointed tmstee of the discretionary trust.

I f you have fHlther questions. please feel [Tee to call.

. Public Guardian and Trustee..c:;-......

Per: __.-:.__...~~~~Ronald J. Kruzcniskl, Q.c.


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