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<< back to all ArticlesAISH and Estate Planning in Alberta: Part I
Important Considerations Regarding Financial Eligibility and AISH Trusts
For many Albertans with disabilities, AISH (Assured Income for the Severely Handicapped) provides not only a monthly living allowance but also important health, personal, and other benefits.
There are strict financial criteria for maintaining eligibility for AISH benefits. As a result, when it comes to estate-related issues like inheritance, gifts can have the unintended consequence of impacting individuals’ financial criteria for eligibility and causing a loved one to lose access to important AISH benefits. Because of these risks, it is important for families of individuals receiving AISH benefits to be aware of the financial limits for AISH eligibility and be intentional about taking steps to preserve their loved one’s AISH eligibility in their estate planning.
The first in a series on AISH and estate planning, this blog post provides an introduction to important considerations and steps families can take in their estate planning. It discusses AISH eligibility and incorporating trusts into estate planning as a way for families to ensure that loved ones do not lose access to important AISH benefits.
Understanding AISH Eligibility and Financial Implications
Individuals have to meet both medical and financial criteria to be eligible for AISH. They also have to be at least 18 years of age and not eligible to receive an Old Age Security (OAS) pension. Where a person meets the necessary medical criteria, changes to their financial situation can impact their eligibility for AISH benefits or the amount of monthly living allowance received.
Financial eligibility
AISH considers both individuals’ income and assets when determining whether an individual meets the necessary financial criteria. Where a person has a spouse or partner, their income and assets are also considered.
Income
Generally, AISH considers forms of income recorded on individuals’ tax returns for the purposes of determining AISH eligibility. Whether a person receiving AISH benefits is single, has a spouse or partner (and whether that spouse or partner also receives AISH benefits), and whether they have any dependent children are all relevant to how AISH considers income for the purposes of determining eligibility.
Certain forms of income are exempt, meaning that they are not counted toward the maximum income for AISH eligibility. Some examples of these exempt forms of income include:
- Cash gifts
- Income tax refunds
- Registered disability savings plan (RDSP) payments
- Registered retirement savings plan (RRSP) payments
Some forms of income are partially exempt, meaning that only part of their value is counted when determining AISH benefits. Examples of partially exempt income include:
- Income paid by an employer
- Self-employment income
- Passive business income
- Certain forms of income received by a spouse or partner
It is important to be aware of the income limits, how AISH treats different forms of income, and the impact that income may have on the monthly living allowance and AISH eligibility.
Assets
Assets are items of value and include cash, investments, property, and vehicles. AISH divides assets into exempt and non-exempt asset categories.
AISH considers certain assets to be exempt. Exempt assets do not impact a person’s eligibility for AISH benefits. Some examples of exempt assets include:
- A home or quarter section where an individual lives
- A primary vehicle
- A second vehicle adapted for a disability
- A Registered Disability Savings Plan (RDSP)
- Clothing
- Reasonable household items
- A trust
Two of these exempt assets – trusts and RDSPs – will be discussed in detail in this series of posts.
AISH allows for combined non-exempt assets of up to $100,000.00, including:
- Cash
- Chequing or savings accounts
- Tax-free savings accounts (TFSAs)
- Registered retirement savings plans (RRSPs)
- Cash inheritances
- A recreational property or home
- Recreational vehicles.
Where a person receives money that AISH does not consider income, they have a 365-day grace period within which to invest it as an exempt asset; otherwise, it will be considered a non-exempt asset and counted toward the $100,000.00 limit. This grace period ensures that individuals are not immediately disentitled to their AISH benefits. The ability to invest the money as an exempt asset also provides for estate planning opportunities that allow individuals and families to preserve a person’s eligibility for AISH benefits.
Examples of kinds of money not considered income and that fall into the 365-day grace period include:
- An inheritance
- A gift
- Money from selling the main home or quarter section where a person lived
- Money from selling a primary or adapted vehicle
- Money from an insurance payout to cover damages to or loss of an individual’s main home or vehicle
In addition to taking steps to invest funds in exempt assets during the grace period, estate planning can provide options for families to take to ensure that a loved one’s eligibility for AISH benefits is not impacted by inheritance and other gifts.
Using Trusts in Estate Planning to Protect AISH Eligibility
Relatively recent changes to Alberta’s AISH legislation added trusts as an exempt asset. A trust is a legal arrangement used in estate planning to provide for the preservation of assets for the ongoing care and support of a person.
Under a trust, the person setting up the trust (the “settlor”) gives money or property to a person (the “trustee”) who holds it for the benefit of another person (the “beneficiary”). Usually, the settlor, trustee, and beneficiary of the trust are all different people; however, there can be a range of different arrangements for trusts.
There are two ways that trusts can be set up for estate planning purposes: through a Will (what is called a “testamentary trust”) or through a living trust (also called an “inter vivos trust”). Testamentary trusts are commonly used in estate planning, for example, for gifts in a Will that might be made to beneficiaries under the age of 18. By contrast, inter vivos trusts are established during the settlor’s lifetime.
Money and other assets held in trust are held for the benefit of the beneficiary of the trust. AISH considers trusts to be exempt assets, meaning that funds held in trust for a person receiving AISH benefits are not counted toward that person’s non-exempt asset limit and do not impact the beneficiary’s entitlement to AISH benefits.
The trustee manages the assets in the trust for the benefit of the beneficiary and can make payments to the beneficiary. Trusts can be discretionary, meaning that the trust provides the trustee with full discretion in distributing income and capital from the trust to the beneficiary. Alternatively, trusts can be non-discretionary, in which case the trust document states the amounts and frequency that payments of income and/or capital must be made to the beneficiary.
By taking AISH financial criteria for eligibility into account, trusts can be structured to provide for individuals’ needs without impacting their eligibility for important AISH benefits. Income paid from a trust to the beneficiary may impact the amount of living allowance an individual receives; however, by holding assets in trust for an individual receiving AISH benefits, families can ensure that a well-intended gift or inheritance does not inadvertently make their loved one ineligible for AISH benefits. In this way, establishing a trust and taking other proactive estate planning steps can give families peace of mind when it comes to caring for their loved ones receiving AISH benefits.
Need Help Planning?
For guidance on estate planning, trusts, and planning for individuals receiving AISH benefits, contact us for assistance. RDSPs and other important considerations for preserving AISH benefits in estate planning will be discussed in the next part of this series on AISH and estate planning.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.
