A new panel appointed to help the parents of severely disabled children save for their children’s long-term care is examining a variety of tax-deferred savings plans, says panel chairman Jim Love. If you have clients with disabled children, this is a prime opportunity to speak with them to find out how the tax system might be changed to help them.

The panel was appointed in July by federal Finance Minister Jim Flaherty, who attended its inaugural meeting in Toronto in August.

“He has made it very clear that he is seeking a recommendation to put in the next budget,” says Love, a partner with Toronto law firm Love & Whalen, as well as CEO of Legacy Private Trust. “This is clearly not a report to appease people and subsequently get put on a shelf.”

Against the backdrop of a minority federal government, the panel has been given the very tight deadline of Nov. 9 to make its recommendations. As a result, the panel isn’t in a position to hold formal hearings, says Love. But input for the panel’s consideration can be sent by e-mail to disabilitysavings-esparagne-handicappes@fin.gc.ca.

Flaherty personally called Love to see if he would chair the panel. Love’s trust company has been active in giving seminars to groups that support disabled people. As parents age, Love notes, they worry about their ability to provide both physical and financial support to their disabled adult children. “Their adult children are going to outlive them,” he says.

The work of this panel follows on the heels of recently passed tax changes to amend the disability tax credit, clarifying and extending eligibility.

Laurie Beachell, national co-ordinator of the Winnipeg-based Council for Canadians with Disabilities, was a member of the advisory committee that recommended the changes. He is one of the members of the new panel, which has a more specific mandate, he says.

This panel’s challenge will be to look at how the tax system might be used to help families meet the needs of disabled adult children, who are often in the lowest income bracket. A problem such families frequently face, for example, is that any money left to an adult disabled child by a deceased parent results in a clawback of provincial benefits.

One support group that has already provided input is Vancouver-based Planned Lifetime Advocacy Network, a non-profit organization that helps families plan for relatives with disabilities.

PLAN’s October 2005 paper entitled Disability Savings Plan: Policy milieu and model development has proved influential. Under the PLAN model, taxes on contributions would be deferred during the lifetime of the disabled individual. Assets still in the plan when the disabled person dies would then be taxable.

A variety of expenditures and disbursements would be allowed under the PLAN model, including lump sums or regular payments, home purchase or modifications, medical devices and caregiver expenses. The expenditures and disbursements would be exempt from taxation or clawbacks of provincial benefits.

The panel has examined PLAN’s suggestions as part of its deliberations, says Love, adding that the panel now is focusing on three models.

The first is an RRSP-type model, in which parents, grandparents or other relatives might make tax-deductible contributions. A disabled adult might not have much income when he or she eventually withdraws the funds, so there wouldn’t be much — if any — taxes to pay.

Another model would be similar to the “tax-prepaid savings plan” model. This savings model works opposite to the way that an RRSP operates. Contributions are not tax-deductible, but eventual withdrawals are not taxable.

TPSPs were noted in the 2004 federal budget as a subject of continuing examination for all taxpayers. Since then, however, TPSPs seem to have dropped off Finance Canada’s radar screen.

The lack of tax-deductible contributions may be a disincentive, says Love, adding that RESPs initially were structured that way and, as a result, lacked appeal.

That changed, Love says, when Ottawa made amendments to the RESP mechanism and began to provide grants that match a certain portion of annual RESP contributions. This offsets the lack of a tax deduction, Love says.

Love expects the panel will recommend a third model — a hybrid of these plans: a TPSP that allows contributions to be made by variety of relatives, combined with a grant program. However, he notes, the panel “is still in the early stages” and the state of the federal coffers will have to be taken into account when considering any recommendations made by the panel. IE

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