Income, Assets and BC Disability Benefits
Ironically, financial security may seem easier to achieve if you or your loved one is not receiving BC Disability Benefits (and the same comment applies in most other Canadian provinces as well.
It’s ironic because the program was established to provide financial security for people with disabilities and because people face significant eligibility hurdles to qualify for the program and yet, once they are receiving benefits, it often feels like it is impossible to get ahead, to have more income and to save for the future.
There are two reasons that people often feel this way. First, the amount that people receive each month ($375 shelter + $531 support = $906 for a single person with no dependents) is barely enough to live on. While people survive, they are not likely to feel that they have financial security. Furthermore, for those people who live in any of the urban areas (the Lower Mainland, Victoria, Kelowna) finding a decent place to rent for $375 is impossible. Second, people must report all income each month and although the first $500 of earned income is exempt, most people feel the barriers and risk associated with getting ahead are not worth it. This feeling is reinforced when stories about people being audited, being slightly over the asset limit and having to repay significant amounts of money, are circulated.
The rules which are most problematic arise from the program’s origin. Like most provincial disability benefits programs, BC Disability Benefits arose from BC’s social assistance (welfare). The disability program is different because people receive a bit more money than those on social assistance and are not required to continually seek employment.
Welfare programs are both income and asset tested – that is, government is the “payer of last resort”. That means a person won’t qualify if his/her assets are above a certain limit and if he/she receives income, is must be used before qualifying for assistance. Similarly, BC Disability Benefits is asset and income tested:
- A person may “earn” up to $500 per month without a reduction in benefits
- A single person with no dependents can have up to $3,000 total in liquid assets.
If a person’s assets exceed $3,000 by even a dollar, they no longer qualify for benefits. This means that they do not qualify for their support or shelter amount for the following month.
To be fair to the BC Government, there are numerous exemptions from both income and assets. For example, in 2008 the Government exempted RDSPs (the RDSP itself and income from it). Prior to that trusts up to $100,000 and certain expenditures (e.g. disability related expenses, education and training) from trusts were exempted. In addition, assets and income managed by a Committee (adult guardian) are treated as it they were held in trust.
One of the major problems is that the system is so complicated: the definitions and lists of exemptions for assets and income are many pages long, are written in legal format and most people find them difficult to understand.
Tips for Families and People on BC Disability Benefits
1. Know the Rules – You need to know the rules to know that you are in compliance. The Ministry has a right to look at all of a person’s bank accounts and can, and does, review them periodically. You also need to know the rules to achieve future financial security. Stay up to date – the rules change periodically. Make sure your sources are trustworthy – just because someone says they know the rules doesn’t mean that they do. You will always be responsible for your actions.
2. Keep an eye on Your Assets – The asset limit for a single person with Persons with Disabilities (PWD) designation is $3,000. For a couple or a single parent family with PWD designation, the asset limit is $5,000. The total of all of a person’s non-exempt assets get counted.
a. Exempt Assets – The following assets ARE exempt (i.e. don’t count in the $3,000/$5,000 limit):
- An amount in a Registered Disability Savings Plan (RDSP)
- An amount in an Registered Education Savings Plan (RESP)
- Any amount in a discretionary trust
- Up to $100,000 in a non-discretionary trust (Note: this amount may be greater at the discretion of the Minister)
- A home that the person lives in
- A motor vehicle used to get around
- Assets that are managed by a Committee (adult guardian).
b. Non Exempt Assets – The following assets are NOT exempt (i.e. DO count in the $3,000/$5,000 limit
- Any cash in your bank accounts or cheques that could be cashed
- An amount in an RRSP (unless it is locked-in through an employer retirement saving plan)
- An amount in a Tax Free Savings Plan (TFSP).
3. Monitor and Report Your Income – All income has to be reported each month but not all income is deducted from the following months payment. The first $500 of “earned income” is exempt. Earned income is income that a person receives through:
- Work or the provision of a service
- Tax refunds
- Money received from providing room and board at a person’s home
- Money received from renting rooms that are part of a person’s place of residence.
Remember: any amount earned beyond the $500 exemption in any given month is deducted from the following month’s disability payment.
4. Make Deductions from Earned Income – Income received by renting out rooms or charging room and board at the person’s place of residence (owned or not owned) is considered earned income. Where rent is received, 25% of the rent can be deducted from earned income. Where room and board is received, the essential costs for providing room and board can be deducted from earned income
5. Gifts are Okay – Gifts that a person receives ARE exempt income. If a gift results in a person having assets over the asset limit ($3,000/$5,000) then the person would no longer be eligible for benefits. (Note: If a family gives a person a regular amount each month, for example to assist with rent, is not considered a gift. If regular assistance is discovered after-the-fact, the total amount of the assistance could be repayable to the Ministry as it should have been declared and would have been deducted from the subsequent payments.)
6. Exempt Income is Okay – The following income tax benefits ARE exempt income:
- the basic Child Tax Benefit
- BC Harmonized Sales Tax Credit
- Working Income Tax Benefit
7. Trusts can be a Valuable Planning Tool – Amounts for received from or expended from trusts for the following purposes are exempt:
- Aids and devices related to improving the person’s health or well- being
- Caregiver services or other support services related to the person’s disability
- Education or training
- Items or services to promote the person’s independence (this is limited in policy to $5484 per year)
- Renovations to a place of residence necessary to accommodate the person with a disability
- Home maintenance and repairs.
8. RDSPs are a Great Option – RDSPs to any size are exempt assets. Any money received from an RDSP is exempt income. If a person qualifies for an RDSP it is usually the best planning tool available to individuals and families.
Employment and Assistance for Persons with Disabilities Regulation