A. When Does an RDSP Beneficiary Need a Legal Representative?
1. Every RDSP Needs a “Plan Holder”
The Income Tax Act says who can open and make decisions about money in an RDSP.
To open an RDSP, a person called a “plan holder” signs a contract with a financial institution.
After opening an RDSP, plan holders may be able to make other decisions, such as applying for government grants and bonds, making investments and asking for some money to be paid to the beneficiary.
The plan holder’s powers depend on the contract with the financial institution. Plan holders often make important decisions about managing money in the RDSP.
When beneficiaries are adults, they can be the plan holder.
Some adults who need help making decisions may not be able to be the plan holder because they have been assessed under the law as being incapable of entering into a contract. In these cases, someone else must be the plan holder.
Banks, credit unions or other financial institutions can refuse to open RDSPs for beneficiaries who are not able to enter into a contract under the law because they do not believe that the person is capable of doing so.
Beneficiaries and other persons (such as a family member) may also want to name a legal representative because they believe that the beneficiary requires someone else’s help to open and make decisions about RDSP money.
- We look at what capacity means in this summary at page 11.
- More information on plan holders is in found in the Discussion Paper, Ch. II.B.2, Capacity Laws as a Barrier to Accessing the RDSP.
2. Some Adults May Need Help Spending Money Taken Out of an RDSP
A plan holder makes decisions about money when it is still in an RDSP. But when beneficiaries receive money out of an RDSP, they can spend it on anything that they want.
The LCO has heard that some beneficiaries may have difficulties making decisions about how to spend money that they get from an RDSP. A plan holder does not automatically have powers to help a beneficiary with these types of decisions.
One of the issues we look at in our project is what powers legal representatives should have.
For example, should legal representatives have all or some of the plan holder’s powers? Should they have more powers to help beneficiaries with spending the money they get from an RDSP?
- We look at this issue again in the summary at pages 20 to 21.
- For more information on the types of decisions that can be made for an RDSP, see Discussion Paper, Ch.II.B.2, Critical Times for Decision-Making: Opening the RDSP, Deciding Plan Terms and Managing Funds that Have Been Paid Out of the RDSP.
Question 1: Have you tried to open or make decisions about an RDSP but were told that you were not able to because of your capacity?
Question 2: Do you think that you could have difficulties spending money that you get from an RDSP?
B. Who Can Be a Legal Representative for RDSP Beneficiaries?
The Income Tax Act says that someone who wants to be a plan holder for an adult beneficiary must be a “qualifying person”.
Qualifying persons can be guardians and other persons who are authorized by law to make decisions for an RDSP beneficiary.
In Ontario, the Substitute Decisions Act, 1992 explains how to get a guardian or attorney.
If Ontario had a new process only for naming a legal representative for RDSP beneficiaries, the legal representative would need to be accepted as a person who is authorized by law under the Income Tax Act.
- The Discussion Paper looks at parts of the Income Tax Act that say who can be a “qualifying person” (and also a plan holder) in Ch. II.B.1, Capacity Laws as a Barrier to Accessing the RDSP.
C. What Does “Capacity” Mean?
In the definitions section, we explained that capacity is about who is able to make decisions for themselves under the law. In Ontario, adults are assumed to be able to make decisions for themselves unless tests show that they cannot.
The tests for capacity are different for different types of decisions; for example, the tests may be about the ability to decide where to live or about managing money. There are also tests to show that adults can name someone else to make decisions for them in a power of attorney.
The tests for capacity are different because each person has unique abilities. Adults may be able to make some decisions for themselves but may require someone else’s help for other decisions. These abilities can also change from day to day and over an adult’s lifetime.
The LCO believes that an adult’s ability to make decisions can become stronger with the support of other people. We also believe that adults must be able to make choices that affect their lives and do as much for themselves as possible with the supports that they need. These are principles that we use in this project.
- The LCO’s project is only about RDSP decisions. We explain Ontario’s tests for capacity that are related to the RDSP in the next section, How Can a Person Name a Guardian or Attorney for the RDSP in Ontario?
- For more detailed information on what capacity means see the Discussion Paper, Ch. II.B, The Importance of Capacity When Adults Seeks to Access the RDSP.
D. How Can a Person Name a Guardian or Attorney for the RDSP in Ontario?
There are different ways in Ontario for adults to name a person to take care of their money for them. Here we explain how this can be done.
1. Continuing Powers of Attorney for Property
Adults who have capacity to do so can choose who will make decisions for them in the future when they are not able to make their own decisions by naming one or more than one person in a continuing power of attorney for property.
They can ask the attorney to help them manage their money at any time. Because it is “continuing”, the power of attorney will continue to be valid when the adult no longer has capacity and it will not be necessary to find a guardian to do what the attorney can do.
An individual is assumed to have capacity to make his or her own decisions about financial and other matters unless tests show he or she does not.
There are tests to show that an adult has capacity under the law to choose someone to make decisions about money for them.
In Ontario, the Substitute Decisions Act, 1992 has a detailed test to choose someone to make decisions for you about money in a power of attorney. That test is found in Appendix B of this summary. It has been described as requiring that you must
- know what property you have and its approximate value;
- be aware of your obligations to the people who depend on you financially;
- know what you are giving your attorney the authority to do;
- know that your attorney is required to account for the decisions they make about your property;
- know that, as long as you are mentally capable, you can revoke (cancel) this power of attorney;
- understand that if your attorney does not manage your property well its value may decrease; and
- understand that there is always a chance that your attorney could misuse their authority.
- The test for capacity to make a continuing power of attorney in Ontario is found in Appendix B of this summary.
- For more information on continuing powers of attorney, see Discussion Paper, Ch. III.B.1, The Personal Appointment Process: Continuing Powers of Attorney.
There is a process for naming someone to be a guardian for adults who do not have a continuing power of attorney and who do not have capacity to name someone for themselves.
To get a guardian, adults must be found to be incapable of managing property. The Substitute Decisions Act, 1992 defines what incapable of managing property means. The test for incapacity to manage property is found in Appendix B of this summary. It has been described this way:
The [Substitute Decisions Act, 1992] sets out a two-part definition of mental capacity in that the person must have the ability to understand information relevant for making decisions, and in addition, show the ability to appreciate the consequences of a decision or lack of a decision.
There are two ways that a person can ask for a guardian to be chosen to make decisions for an RDSP beneficiary: capacity assessments for statutory guardianship and court orders.
Capacity Assessments for Statutory Guardianship
One way to get a guardian is to ask to have a capacity assessment. When a guardian is named without a court order because of a capacity assessment, it is called “statutory guardianship”.
Beneficiaries can ask for a capacity assessment or someone else can ask for them.
Capacity assessments take place in the community and everyone has the right to refuse to be assessed. Capacity assessors are specially trained professionals who follow guidelines.
The Public Guardian and Trustee automatically becomes the guardian for adults who are found to be incapable by a capacity assessor.
Some persons can apply to the Public Guardian and Trustee to take over from the Public Guardian and Trustee as the guardian. They are a spouse or partner, a family memb