People in Ontario with a disability who are recipients of the Ontario Disability Support Program (ODSP) are not allowed to have any liquid assets in excess of $5,000. Liquid assets are listed as bonds, stocks, mutual funds, inheritances and the beneficiary of a life insurance policy. However certain items are exempt from the asset limit. In particular they may own a life insurance policy on their own life with a cash surrender value of up to $100,000. In 1998 the question was, if an ODSP recipient owned a deferred annuity which is known as a segregated fund, is the segregated fund considered a Life Insurance policy?
The definition of a segregated fund as a life insurance policy in the Ontario Insurance act is as follows, "an undertaking entered into by an insurer to provide an annuity or what would be an annuity except that the periodic payments may be unequal in amount and such an undertaking shall be deemed always to have been life insurance "The leading case in Ontario on annuities as a life insurance policy is the 1982 decision of Mr. Justice Saunders Re; Laroque. A trustee in a bankruptcy attempted to seize Mr. Laroque's RRSP which was a deferred annuity contract that provided for a life annuity commencing at the maturity date. The trustee responded that, notwithstanding that the deferred annuity contract qualified under the definition of "Life insurance" there was no person whose life was insured.
So Justice Saunders concluded that Mr. Laroque was "a person whose life was insured" by responding as follows: "In my opinion, there is an element of risk in the contract entered into by Mutual which is dependent on the life of Laroque. While the nature of the risk to the insurer is different in an annuity from that in a standard life insurance contract, there is a risk nonetheless. In the former, there is a risk that the annuitant may live longer than expected and in the latter that he will die earlier that expected. It seems to me that if the RRSP (deferred annuity) is a contract of life insurance in the statutory sense, there must be a person whose life is insured. That person, in my opinion is Mr. Laroque. I am unable to see any difference in determining this issue between a contract which provides for payment following death and a contract that provides for payment that ceases on death. Both are founded on an estimate of life expectancy"
Therefore a "deferred annuity" issued by a life insurance company is defined in the Ontario Insurance Act as a "life insurance contract," and Mr. Justice Saunders decision in Laroque confirmed that "an annuity" is a life insurance contract. Therefore a recipient of the Ontario Disability Support Program can own an annuity (segregated fund) on their own life with a cash surrender value of up to $100,000 dollars and continue to receive their ODSP disability benefits. The recipient may also withdraw up to $6,000 per year from the policy without jeopardizing their disability benefits. In 2000 John Dowson Executive Director of Life TRUST Planning submitted his brief to the ODSP director requesting that a segregated fund be recognized as a life insurance contract. Consequently on October 18, 2000, Mr. Dowson received a letter from the director confirming his request "the ministry recognizes the existence of deferred annuities and segregated funds as a life insurance product and a deferred annuity, segregated fund, is a life insurance policy". Hundreds of ODSP recipients who would have otherwise have lost their social benefits can and do have up to $100,000 in a segregated fund and continue to receive their entitlements.
The definition of a segregated fund as a life insurance policy in the Ontario Insurance act is as follows, "an undertaking entered into by an insurer to provide an annuity or what would be an annuity except that the periodic payments may be unequal in amount and such an undertaking shall be deemed always to have been life insurance "The leading case in Ontario on annuities as a life insurance policy is the 1982 decision of Mr. Justice Saunders Re; Laroque. A trustee in a bankruptcy attempted to seize Mr. Laroque's RRSP which was a deferred annuity contract that provided for a life annuity commencing at the maturity date. The trustee responded that, notwithstanding that the deferred annuity contract qualified under the definition of "Life insurance" there was no person whose life was insured.
So Justice Saunders concluded that Mr. Laroque was "a person whose life was insured" by responding as follows: "In my opinion, there is an element of risk in the contract entered into by Mutual which is dependent on the life of Laroque. While the nature of the risk to the insurer is different in an annuity from that in a standard life insurance contract, there is a risk nonetheless. In the former, there is a risk that the annuitant may live longer than expected and in the latter that he will die earlier that expected. It seems to me that if the RRSP (deferred annuity) is a contract of life insurance in the statutory sense, there must be a person whose life is insured. That person, in my opinion is Mr. Laroque. I am unable to see any difference in determining this issue between a contract which provides for payment following death and a contract that provides for payment that ceases on death. Both are founded on an estimate of life expectancy"
Therefore a "deferred annuity" issued by a life insurance company is defined in the Ontario Insurance Act as a "life insurance contract," and Mr. Justice Saunders decision in Laroque confirmed that "an annuity" is a life insurance contract. Therefore a recipient of the Ontario Disability Support Program can own an annuity (segregated fund) on their own life with a cash surrender value of up to $100,000 dollars and continue to receive their ODSP disability benefits. The recipient may also withdraw up to $6,000 per year from the policy without jeopardizing their disability benefits. In 2000 John Dowson Executive Director of Life TRUST Planning submitted his brief to the ODSP director requesting that a segregated fund be recognized as a life insurance contract. Consequently on October 18, 2000, Mr. Dowson received a letter from the director confirming his request "the ministry recognizes the existence of deferred annuities and segregated funds as a life insurance product and a deferred annuity, segregated fund, is a life insurance policy". Hundreds of ODSP recipients who would have otherwise have lost their social benefits can and do have up to $100,000 in a segregated fund and continue to receive their entitlements.
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