How Can an Ontario Couple Ensure Their a Disabled Son Is Taken Care of After They Die?

Why It Matters

The strategy shows how Ontario families can combine Henson Trusts, RDSP growth, and tax‑smart withdrawals to protect disability benefits while providing sustainable income for a disabled heir, a model increasingly vital as Canada’s aging population expands.

Key Takeaways

• Henson Trust shields inheritance from ODSP asset tests
• RDSP could grow to $400k CAD by age 60
• Life insurance proceeds generate ~$17.5k CAD annual income
• Tax‑efficient RRSP withdrawals before death reduce estate tax
• Balanced investments may boost RDSP to $1.2M CAD

Pulse Analysis

Ontario’s disability‑focused estate planning has a powerful tool in the Henson Trust, which isolates a beneficiary’s inheritance from means‑tested programs like ODSP. Contrary to popular belief, the $10,000 annual withdrawal cap applies only to non‑disability expenses, not to the total trust value, allowing families to leave unlimited assets without jeopardising benefits. By placing life‑insurance proceeds and any surplus estate into a Henson Trust, parents can ensure a steady income stream while preserving eligibility for government supports.

The Registered Disability Savings Plan (RDSP) is another cornerstone, offering tax‑sheltered growth and government matching grants. While the couple’s current $100,000 CAD RDSP is projected to reach $400,000 CAD by the son’s 60th birthday under a conservative 4% GIC return, a shift to a balanced or growth portfolio could push the balance to $800,000‑$1.2 million CAD, dramatically increasing monthly income potential. This illustrates the trade‑off between low‑risk GICs and higher‑return diversified assets, a decision that should align with the beneficiary’s risk tolerance and long‑term care costs, which can exceed $5,000 CAD per month for specialized facilities.

Tax efficiency remains critical when converting retirement savings into usable cash. Rempel’s recommendation to begin RRSP withdrawals in the mid‑70s, keeping taxable income below the $58,000 CAD threshold, avoids the steep 54% marginal tax rate that applies to estates exceeding $258,000 CAD. Reinvesting those withdrawals in unregistered GICs generates taxable interest now, but the overall tax burden is lower than deferring the drawdown until death. This approach not only preserves more capital for the disabled heir but also safeguards the remaining estate for the couple’s other children, highlighting a balanced, forward‑looking model for families navigating disability, retirement, and intergenerational wealth transfer.