TEL. (613) KENNETH C. POPE LL.B TEP FAX (613)

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1 TEL. (613) KENNETH C. POPE LL.B TEP FAX (613) BARRISTER, SOLICITOR and NOTARY PUBLIC SUITE BANK STREET OTTAWA, ONTARIO K2P 1X3 Toll Free [email protected] From: Kenneth C. Pope LLB TEP To: OTLA Spring Conference Attendees Date: May 27 th, 2010 Re: Undesirable Consequences of Matrimonial, Personal Injury and other Claims on Ontario Disability Support Benefits ( ODSP ) and Better Alternatives for Clients. Many people in Ontario have disabilities and receive ODSP benefits each month, typically $1,020, plus coverage for drug needs that may be very expensive. Other personal supports and needs are also available, such as diabetic supplies, incontinence supplies, transportation services, assistive devices, and other disability related needs. There are in excess of 250,000 people in Ontario receiving these benefits. To qualify financially they cannot have assets available to support themselves of more than $5,000. Any income or support would disqualify or offset monthly financial benefits. These asset and income tests would also potentially disqualify the person from drug coverage and the other supports and devices that they receive. In the normal course of (a) matrimonial litigation and (b) personal injury claims, the former perhaps being affected by mental health problems on the part of one spouse, and the latter disabilities resulting from a personal injury or MVA, law firms will commonly be seeking spousal support and a division of assets, or injury settlements and benefits. In some cases claims relate to retroactively reinstating Long Term Care (LTC) payments and coverage such as medications and therapy. In each of these cases the normal course of litigation or furthering a claim involves seeking income, payments or financial settlements which if handled in the usual way will simply offset benefits already being received from ODSP sources.

2 There are, fortunately, some better solutions which can be brought to bear. Example One: Matrimonial Claims A couple are married for a period of years, have three children, and find that after each child the wife suffers from post partum depression or other depression triggered by the stress of children and responsibilities. After the third child the parties separate, the children stay with the father in the family home, the wife moves to an apartment and applies for ODSP benefits which are received. The wife retains a family law lawyer to seek spousal support and a division of the matrimonial assets. The lawyer commences the process of claiming the appropriate amount of spousal support based upon the husband s normal income. The process drags on, and at some point the wife realizes that spousal support will simply offset her ODSP and end her medication coverage, in return for which she will receive spousal support in some modest amount in excess of ODSP benefits. The family unit will then be less well off, there will be less money available to raise the children, drug coverage will be more expensive and the normal process will have led to a worse outcome. In addition, a division of the equity in the matrimonial home by way of second mortgage to pay out the wife will result in an asset in her hands which will again disqualify her from ODSP, and will increase the monthly carrying costs for the husband and children. Alternative Options: Drop the spousal support claim, and agree to a larger share of the equity in the matrimonial home to go to the wife. Arrange to make payments to the wife of $6,000 every 12 months, since she can receive from any source up to this amount over this period. If a lump sum share is to be received, or a larger annual amount (such as $20,000), arrange to have this done is such a way that only one month s ODSP is lost and clawed back. This amount is repaid by a reduction of approximately $50 of her ODSP benefits each month. Although the simple asset test for the wife is $5,000, I can arrange for her to have up to $100,000 held and invested in an exempt form for ODSP asset test purposes. Further than this, if the matrimonial division is much greater, it is possible for her to purchase a home for herself, and arrangements can be made for the husband to help with shelter costs without affecting ODSP. If the wife is markedly restricted in the activities of daily living, such that she qualifies for the Disability Tax Credit, and if she is younger than age 59, it is also possible to set up a Registered Disability Saving Plan for her, to which can be contributed up to $200,000. This

3 money would then become available for her when she reaches age 60, to supplement her income without affecting ODSP, which ends at age 65. Example Two: Personal Injury & MVA Claims An adult child has been injured in some way, to such a degree that there is a resulting disability. The child applies and qualifies for ODSP benefits, and begins receiving benefits while the litigation process commences. As the parties approach settlement, the defendant, his parents or his solicitor comes to realize that the cash or structured settlement will disqualify the boy from ODSP benefits. At this point it is still possible to arrange the payment structure to most effectively maximize ODSP benefits along with the structured arrangement, thereby enhancing the terms of the final settlement overall. This may lead to a quicker settlement and a lessening of litigation trauma. Alternative Options: It is possible to have the consent judgment structured in such a way that it is effectively a Henson trust Order. A trust structure contained in the Order is an exempt asset for ODSP purposes, to an unlimited amount, although payments out of the structure can affect benefits. Since the child quite possibly is receiving ODSP benefits of $1,020 plus drug coverage and is provided with in home supports and assistive devices, regular payments to him or a lump sum exceeding $100,000 will result in his being disqualified for these benefits. A Henson trust Order results in a court approved structure that should not affect his other benefits. If no such Order is put in place and benefits are going to be lost, it is quite possible to use the existing ODSP policy directives to defer settlement of funds until needed, to reduce regular payments to amounts that do not offset ODSP, to make payments on an irregular basis such that ODSP benefits are only lost in certain months, and to ensure that payments are made for disability related expenses which are allowed under the rules. For example, if the injured party will be living with his parents in their house renovated for his accessibility purposes (until such time as this is not practical for the family as the parents age), it is possible to defer the settlement of funds not presently needed rather than receiving them right now. In one case I arranged for a large portion of the settlement to be used to buy the new accessible home that the parents had built to care for their son from them, the son becoming the owner. The parents received the proceeds of sale, which is appropriate, and the son can own a home and also receive ODSP benefits. In this case the proceeds from the sale of the house were set aside and left to a Henson trust for the boy in the parents Wills. The parents pay the share of the housing costs that the boy cannot afford.

4 A further settlement of slightly more than $100,000 was deferred until after the father s retirement when his income would be reduced. Until that time they would provide for the boy from their own means. Example Three: Canada Pension Plan Disability (CPP-D) and Long Term Disability (LTD) Claims A young worker is (a) severely injured at work, successfully applies for CPP-Disability and begins to receive benefits of $600 per month, or; (b) acquires a disability such as fibromyalgia or a chemical sensitivity and starts to receive short term disability benefits from work but after two years is deemed fit by the disability carrier to return to work of some sort and is cut off. At a later point, when the person has been approved for ODSP and is receiving benefits, a claim for retroactive and ongoing LTD benefits is made In the first case, a successful CPP-D recipient has satisfied a disability test higher than the test for ODSP benefits and would be automatically medically approved for ODSP. ODSP benefits are almost invariably greater than CPP-D, and will top up the benefits to $1,020 plus provide drug coverage which CPP-D does not. Unfortunately, the disabled worker is told that his savings and RRSP exceed the $5,000 asset test and that he must support himself on these savings until they decline to the test amount. This is unfortunate advice, but is generally taken as true since it comes from the Ministry office. This is not correct information. It is quite possible to exempt up to $100,000 of his savings and RRSP from the asset test and to thereafter quickly get him onto ODSP benefits. Similarly, if a person is applying for CPP-D simply because they have been working this process can take repeated attempts over a period of years and result in a small amount of disability pension. The better step would be to apply for ODSP, which has a lower disability test (having put their assets into an exempt form first) and then continuing to apply for CPP-D if they wish or if obliged by ODSP as they will be requested to do. In the second example, the LTD claim is approaching a possible mediated settlement but is stuck on the retroactive claim. What needs to be understood is that if the retroactive claim is successful, ODSP will be quite properly owed a retroactive amount of $1,020 for each month of the last three years during which the claim has been proceeding. This reduces the net benefit to the disabled person substantially, in some cases almost completely when the worker was in a low paid position. A better procedure is to calculate how much will be lost and gained for the retroactive period and to stop arguing over an amount that is only going to be repaid to the province in any event, which may speed the settlement. If it is possible, given the fact situation, to have some lump sum calculated on the basis of a pain and suffering amount, then up to $100,000 can be exempted from the asset test in

5 addition to the LTD payments. If the person is a 62 year old worker and will be receiving Old Age Security, Guaranteed Income Supplements and a modest CPP pension, then ODSP will end at age 65 and the terms of the LTD settlement are much more open.