A grandparent wants to leave something behind for a grandchild with a disability. It comes from love, and it seems simple: write the child into the will, done.
But a direct inheritance can do the opposite of what was intended. Many adults with a disability rely on monthly income support from their province. Those programs are usually income and asset tested, meaning there is a limit on how much money or property a person can hold at once. A lump sum that arrives all at once, even a generous one, can push someone over that limit and pause the support they depend on.
The good news is that families have real tools to leave money behind without creating that risk. Here is how the pieces fit together.
When a Direct Inheritance Causes a Problem
Provincial disability programs each set their own asset limits. In Ontario, for example, a single person on the Ontario Disability Support Program can generally hold up to $40,000 in assets before it affects their support. An inheritance that lands directly in a person’s own name and bank account counts toward that limit the same way any other savings would.
Rules and dollar limits differ from province to province, and they change over time, so contacting the provincial program directly is the most reliable way to confirm current numbers. The bigger point holds everywhere: this is not a reason to leave a family member out of a will. It is a reason to think carefully about how the gift arrives, not just how much of it there is.
The RDSP Is Often the Best First Stop
If the family member already has a Registered Disability Savings Plan, that is usually the first place to look. RDSP savings and RDSP withdrawals are generally excluded when provinces calculate disability benefit eligibility, and they do not count against federal income-tested benefits either.
The RDSP has a lifetime contribution limit of $200,000, with no annual cap, so a large gift can often be deposited directly into the plan.
There is a timing detail worth knowing. The government matches personal contributions with grants, up to $3,500 a year and $70,000 over a lifetime, but grants are only paid on contributions made by December 31 of the year the beneficiary turns 49. A single lump sum deposit only attracts grant money for that one year, plus any unused entitlement carried forward from past years, capped at $10,500 in grant for that one year. Spreading a large gift across several years, rather than depositing it all at once, is usually the better way to capture more of the matching money available over time. These federal dollar limits can change over time, so it’s worth confirming the current numbers before acting on them.
What a Discretionary Trust Actually Does
Sometimes the amount involved is larger than the RDSP can hold, or the person has already reached the RDSP contribution limit. This is where a discretionary trust, often called a Henson trust, comes in.
A discretionary trust holds money on someone’s behalf without giving that person a legal right to demand it. A trustee, often a parent, sibling, or professional, decides when and how the money is used. Because the person the trust is for cannot force a payment, the money is generally not counted as their personal asset for provincial disability benefit purposes.
This kind of trust needs very specific legal wording to work as intended, usually written into a will. How these trusts are treated can differ from province to province, so what protects benefits in one place may need adjusting in another. Quebec’s civil law system does not use this kind of common law trust the same way, so families there typically rely on different legal tools to reach the same goal.
The Beneficiary Designation Trap
Wills are not the only place this problem shows up. Life insurance policies, RRSPs, and other registered accounts let the owner name a beneficiary directly, and it is common to simply write in the name of the family member with a disability.
That creates the exact same issue as a direct inheritance. The moment the policy pays out, the money belongs to that person outright, with no trustee involved. Families often name the RDSP or a trust as the beneficiary instead, so the money is managed rather than handed over all at once.
It is worth checking every policy and account, not just the will. A carefully built estate plan can still be undone by a single beneficiary form filled out years earlier and forgotten.
Bringing the Rest of the Family Into the Plan
A parent can build all of this carefully and still see it unravel if a grandparent, aunt, or uncle leaves money directly to the same family member in their own separate will.
Sharing the plan with extended family, in plain terms, helps avoid that outcome. It does not have to be a difficult conversation. It can be as simple as explaining that gifts are welcome, and that directing them to the trust or the RDSP, rather than straight to the person, actually protects more of the gift over the long run.
A little planning ahead of time turns a well-meant inheritance into lasting support instead of an accidental setback. The RDSP, a properly built trust, and a quick check of every beneficiary form are the three places most families find real peace of mind.