Ontario Disability Support Program Income Support Directives

Transcription

1 Ontario Disability Support Program Income Support Directives 4.4 Transfer of Assets for Inadequate Consideration Summary of Policy The Director shall determine that an applicant is not eligible for income support or shall reduce income support in all cases where an assignment or transfer of assets was made for inadequate consideration or for the purpose of qualifying for ODSP within the year preceding the date of application. In cases where there is a valid explanation or an exceptional circumstance the director may determine that the transfer of assets was adequate regardless of the amount of compensation obtained. Income charges will not be applied to the portion of a payment received from the sale of an asset that is, or with approval will be applied towards the purchase of a principal residence; the purchase of an asset necessary for the health and welfare of a member of the benefit unit; the purchase of or conversion to an exempt asset; or the purchase of or conversion to an asset within prescribed limits. Legislative Authority Sections 22(1),(2),(3); 43(1)6 of the ODSP Regulation Summary of Directive Provides direction about the transfer of assets, including property, both prior to and subsequent to an ODSP application and how to determine ineligibility or the amount of reduction in income support when the transfer/sale is for inadequate consideration. When the compensation is adequate but exceeds allowable asset levels, other regulations that may apply are addressed. Outlines the director s authority to consider exceptional circumstances when determining whether or not there was adequate consideration. Intent of Policy To ensure that adequate compensation has been received for assets and/or real property which have been transferred and that such transfers are not made for the purpose of qualifying for ODSP. Page 1 of 5

2 Application of Policy Value of Property Transferred Exceeds Allowable Asset Level Where a transfer of assets and/or real property has occurred and the market value of such assets and/or real property, together with the value of any existing assets, exceeds the allowable level of assets the following will apply: One year prior to the date of application, members of an applicant s benefit unit cannot assign, transfer or dissipate assets in order to qualify for ODSP. This may be increased to three years if there is reason to believe that a three-year period of review is appropriate. Inadequate consideration will be assumed if the property was knowingly transferred for an amount that is at least 25% less than market value unless there is an acceptable explanation or an exceptional circumstance. One example of a valid explanation could be that the assets or real property were sold to repay debt or escape loss of equity due to repossession. An example of an exceptional circumstance could be when an applicant/recipient who does not have the capacity to make an informed decision regarding the disposition of the asset was unduly influenced or persuaded to transfer the asset to another person. The market value of the asset may be determined by consulting dealers in similar commodities to those transferred or by inspecting local real estate listings. At the time of application or during the CVP, information about transfer of assets needs to be provided to the applicant. When a transfer of assets is reported, details of such transfers shall be fully documented. The onus is on the applicant/members of the benefit unit to provide verification of transfer of assets. Discretion may be exercised when deciding to obtain verification if there are significant costs associated with obtaining a bank statement. Where a transfer may affect eligibility for income support, the circumstances shall be reviewed and if the compensation was adequate but exceeds allowable assets, asset limits and assets that can be exempt should be explained. If assets were converted for the benefit of the applicant, rather than for the purpose of qualifying, consideration may be given to section 43(1)6 of the regulation. Income charges will not be applied to the portion of a payment received from the sale of any asset (exempt or non-exempt) that is applied towards the purchase of a principal residence; the purchase of an asset necessary for the health and welfare of a member of the benefit unit; the purchase of or conversion to an exempt asset; or the purchase of or conversion to an asset within prescribed limits. Page 2 of 5

3 Reason for Transfer Inadequate consideration means knowingly not receiving a fair market value for an asset. Fair market value means the money that would have been received if the asset(s) were sold in a competitive situation, taking into consideration the conditions of the market and the attributes of the asset, such as age of asset, condition of asset, current market demand, and location of asset. If the assets have been knowingly transferred without proper compensation, then those transferred assets shall be taken into account as if the applicant still had them. If the applicant/recipient is determined to have knowingly received inadequate consideration for an asset, then he/she is ineligible or the income support is reduced. For example, an applicant who signs a mortgage free second property over to his son because the son and his family live in it and will inherit it one day anyway, has received inadequate consideration. In this case no money changed hands. However, if the son had been paying the mortgage since the father had paid the down payment, the house had not appreciated in value, and when the house was signed over, the son paid the father the amount of the down payment, it may be considered adequate consideration. In this case, the father received the amount of money he had paid into the house and there was no additional appreciation to consider. Each case must be assessed individually. Besides fair market value and record of debts, other factors that should be considered include: situation of applicant/recipient at time of disposal (including the applicant/recipient s ability to make informed decisions regarding the manner in which the asset is disposed); disposal of asset close to time of application (possible intent to qualify); time that has elapsed since disposal of asset; applicant s current situation (income and expenses), and repetitive history of inadequate consideration. Inadequate Consideration for the Purpose of Qualifying Where the transfer was clearly made for the purpose of qualifying for income support, the case will be deemed ineligible. The period of ineligibility will be determined by dividing the net amount of inadequacy by (a) the previous month's ODSP income support (for recipients), or (b) the ODSP income support as if the applicant had not been deemed ineligible under this directive (for applicants). The "net amount of Page 3 of 5

4 inadequacy" is the fair market value of the asset given the conditions of the market and the asset, minus the money received or amount owed if the asset was signed over without money being transferred and minus the maximum allowable asset limit after taking into account current assets. Verification of debt is required. Example: Power pleasure boat signed over to a cousin to qualify. Boat could sell for $20,000. Applicant has $3,000 in the bank so $2,000 can be subtracted from the $20,000 to allow for maximum asset limits. Net inadequacy is $18,000. If the person otherwise qualified for ODSP and was eligible to receive $900 income support per month, the person would remain ineligible for 20 months. Inadequate Consideration but NOT for the Purpose of Qualifying Where the transfer is for inadequate consideration, but NOT made for the purpose of qualifying for income support, the applicant/recipient shall be deemed eligible but the income support reduced to compensate for an established dollar value of the inadequate consideration. The reduction shall be no less than 5% nor more than 20% of the income support and shall continue until such time as the inadequacy has been compensated. Example: Single applicant gave his cousin his fishing boat as a gift. It could sell for $4,500. This together with $3,000 in existing assets exceeds the asset limit. The case is granted with a 5% reduction in the $900 monthly income support that the applicant is eligible to receive. Therefore, $45 will be deducted monthly to pay off the $2,500 that remains above the asset limit. Using Assets to Pay off Debt An applicant/recipient may use assets to pay off pre-existing, previously recorded debts which, if not paid, could result in legal action being taken against them. Individuals must be able to verify through documentation the amount of the debt, that the debt existed prior to receipt of the asset and how and when the asset proceeds were used for the repayment of debt. Examples of acceptable verifiable debt may include government debt such as an Ontario Student Assistance Plan (OSAP) loan or a bill from legal aid. Other acceptable examples include credit card bills or loans from financial institutions. A receipt from OSAP or legal aid, a credit card statement or other official bill may be used to verify the date and amount paid toward the debt. Disposition of assets under these types of situations should not be considered an inadequate disposition of assets under ODSP. Page 4 of 5

5 Considerations in Determining Appropriate Reduction in Income Support In determining the appropriate reduction within the 5% to 20% range, consideration should be given to factors such as: actual monthly expenses in relation to the amount of income support provided, such as extraordinary necessary expenses not provided under ODSP; actual shelter costs in relation to the amount included in the shelter allowance, i.e. shelter costs in excess of shelter allowance or shelter costs equal to shelter allowance. All decisions must be documented and recorded on file. Any transfer or assignment of real property or assets made by a dependent child must also be considered in determining entitlement. Where the applicant/recipient is an adult who is providing temporary care for a child it may be that he/she is not the person who has control over the child's assets. However, any transaction or assignment of assets or real property would require clarification and discussion. Hyperlinks associated with this Policy Directive Related Directives: 4.1 Definition and Treatment of Assets 4.2 Real Property Page 5 of 5