disability planning

Example: Adult With Disabilities in BC

“I am 33 years old and designated disabled by BC’s welfare program. I just received an inheritance of $27,000 and am afraid welfare is going to take it all. Is there anything I can do to keep it and my benefits? I’ve gone without a lot of the basics for a long time, and really need some extra every month to help with both basic costs and disability items.”

I’m so glad you wrote! Many persons with disabilities (PWDs) receive a lump sum at some point in their life, and far too many simply spend it rather than optimize it. With this lump sum, you have some great options for taking care of yourself now and long into the future!

Following are a few thoughts:

Yes, you can keep this money. Write a letter to the PWD program to let them know you received it. Take the letter into the office and get it stamped “received.” Take that copy home with you and keep it. This will serve as proof that you reported this change in assets.

In autumn of 2015, the BC government changed the law. Before, a PWD who was single with no dependents could keep only $5000 in cash. To keep the rest, the PWD needed to transfer the excess to a permitted account, such as an RESP, an RRSP deemed a Trust, or a disability Trust. This was a problematic process, and then the account restricted how one could use the funds.

With the change in law, a PWD who is single can now keep up to $100,000 in cash anywhere she likes.

The above noted, I strongly recommend that you not keep all of it in cash. Keeping it in cash can tempt a person to spend it, and keeping it in cash also doesn’t allow the money to grow. Here is what I would do:

If there is any risk that someone might attempt to make a legal claim on your money, or you think you might blow the money, talk to an advisor about putting the money into a “nondiscretionary Trust.” Money inside this type of Trust is protected from some claims, and also requires that a third party approve any spending. A person whose brains trick them into spending impulsively, or on wants vs needs, can be helped by this. If claims and impulse spending are not a concern, you can skip this step.

Amounts up to $46,500 (2016) can be put into a TFSA. The advantage to this account is that investment growth on the money is not taxed. If you choose this option, to invest without being taxed, any amount over $46,500 (2016) can go into any other account. Money you really might need in the next few years, though, should not be invested.

No matter where you decide to keep the lump sum, do open a Registered Disability Savings Account (RDSP). As soon as it’s set up, call the federal government’s special RDSP number and ask how much to put in right away. Every year after that, the federal government will also send you a letter stating the best amount to put in the RDSP. When you move that year’s optimal amount into the RDSP, the government will then gift you with up to $10,500 per year the first few years, and up to $3,500 for several more years after that. You will not be allowed to touch this money until you are older, but it ensures you have much, much more in those years.

Many people like to grow their money by investing it. But don’t let an advisor trick you into investing in just a few favourite stocks or paying high fees! Because you will not be allowed to touch the RDSP money for a long time, consider investing that. Before you do, start learning about low-fee index funds, which let you easily invest a tiny amount in each of thousands of different kinds of businesses.

If you keep your $27,000 safe from your own overspending, and move the optimal amount from your savings into an RDSP every year, your money will grow extremely quickly. This allows you to help yourself now and long into the future.

Please see my book Rising for more information on how to manage a new bundle of money and how to prepare for investing.

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