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Estates & Wills & Trusts

Legal guardianship and RDSPs: a primer

In the first installment of a two-part series, Ottawa disabilities and estate planning lawyer Ken Pope looks at the critical reasons parents of non-competent children should consider legal guardianship.

Parents of non-competent children should arrange for their legal guardianship before they pass on if they want to ensure the contributions they've made to the Registered Disability Savings Plan (RDSP) remain intact, Ottawa disabilities and estate planning lawyer Kenneth Pope tells AdvocateDaily.com.

“They’re young adults and, inevitably, there will be circumstances where privacy is brought into the picture and the parents won't be able to access the information they need to properly help their children,” says Pope, principal of Kenneth C. Pope Law.

The level of competence required to sign a power of attorney for personal care is low, says Pope who describes it as being slightly above the capacity to marry but below the capacity to divorce. But the test is higher when it comes to property.

“An individual is required to have a comprehension of all of their property and to also understand the implications of their actions,” Pope says.

If the child meets those tests, he suggests the parents should arrange to become  attorneys for property and personal care of their child when he or she turns 18.

Pope says if an adult child is not capable of signing a power of attorney, the parents should seek legal guardianship so that they can continue to look out for their best interests.

The process to gain legal guardianship involves a court application that is normally uncontested and doesn’t usually entail a court appearance, although it does require the involvement of the parents as well as siblings, he says.

“Unfortunately, it involves legal fees and paying for capacity assessments. Because you must have two capacity assessments,” Pope says.

Each assessment costs in the range of $1,000 to $1,500, he says. There are also court filing fees and charges for the Office of the Public Guardian and Trustee to review the application.

Despite the costs, Pope says seeking guardianship is vital.

Without it, the RDSP that the parents previously arranged for the child’s future needs could be compromised, he warns.

Pope says many of his clients set up RDSPs so their children who are not competent will be taken care of after they’re gone.

"The government contributes an annual bond of $1000 for up to 20 years. In addition, along with the parents’ $1,500 annual contribution, the government kicks in $3,500 for up to 20 years," he says. "So, with proper investment, by the time that offspring turns 60, there could be as much as $400,000 set aside for them."

But the whole plan turns on the assignment of an approved account holder — a position that only the parents can hold. Once the parents die, the position remains vacant, he points out.

“If there is no account holder then contractually the RDSP falls apart,” Pope says.

The grants and bonds go back to the government and the money the parents contributed — the $1,500 per year — is paid directly to the incompetent child, he says.

“This is very untidy,” Pope says. “But if there is a legal guardian to take on this role after the parents have passed on, then everything’s good. This is one of the reasons that legal guardianship is essential in many cases.”

Stay tuned for part two where Pope will explain the process of applying for legal guardianship and the nuances of withdrawing from an RDSP.

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