What Are the Downsides of a Disability Trust in BC?

Families usually set up a disability trust so a relative with disabilities can keep getting government benefits while the assets sit outside their own name. The trade-offs are the setup cost, a yearly tax return for the trust, and the ongoing work of tracking spending. As trustee, you are responsible for paying out income properly and keeping good records.

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• BC Disability Trusts

Full transcript

So what are the cons of a disability trust and is it right for my family? Families usually set up a disability trust because they have a family member who is a person with disabilities and receiving government benefits. Sometimes government benefits can be cut off if the person with disabilities has too much income or holds assets in their own name. When that happens, a family member can choose to set up a disability trust to segregate their assets into a trust outside of their legal name and that will help to continue the flow of government benefits to that person with disabilities.

The negative side or the downside of having a disability trust is the set up fee to create the trust. Annual tax returns will have to be filed for the trust because the trust is considered its own taxpayer, and then also maintaining and just administratively keeping track of the spend. If you are the trustee of the trust, then you are responsible for making sure that income is distributed properly, that your record keeping is correct, and that tax returns are filed. And tax returns also cost money to do annually.

General information, not legal advice.