Gary and Liz McLeland do everything they can for their son Tim.
He’s physically healthy but was born with Down syndrome and was later diagnosed with autism. He’s 31 but functions more like a five-year-old and needs constant care and supervision.
“When he was about 10, there was a recommendation about setting up a trust for him that would be used to pay for expenses in his adult life, so it was a long-term kind of thing,” Gary explained to CHEK News.
It was funded by friends of theirs two decades ago, but now, almost 21 years later, they’re faced with the realization that next year, on the 21st anniversary, under Canada Revenue Agency rules, they have to pay tax on the accrued capital gains.
They’ve been prepared for that, but under the Liberal government’s latest budget, the inclusion rate — the portion of capital gains on which tax is paid — is increasing. On the first $250,000, the inclusion rate remains at 50 per cent, any amount earned above that will have the inclusion rate increase to 66.667 per cent. However, for trusts and corporations, the entire amount earned will have an inclusion rate of 66.667 per cent with no exemption.
“It’s just kind of sad that the people who seem to need the money most are the ones who are going to be hit by this tax increase,” Gary added.
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Capital gains taxes are largely seen as the federal government’s way to increase revenue by making the rich pay more when their investments do well, but the McLelands say the trust for their disabled son should be totally different.
“Because I mean it’s focused on making people that have lots of wealth pay more, and if you can tell me that taxing somebody who’s very limited intellectually, who really needs that money, that it’s fair to tax him more, then I’m missing it because in my view there’s no connection whatsoever,” said Gary.
“This is not a wealth issue, we are not wealthy people.”
They say Tim is presently looked after by excellent provincial government services, which they are thankful for, but the trust is to guarantee his care into the future when they are gone.
“I just feel that it really isn’t fair to change the rules because almost 21 years ago, when we set it up, we knew there was going to be that type of a cost at year 21, but now it’s substantially higher,” said Liz.
They say there should be an exception for disability trusts.
The Department of Finance Canada says the changes to the capital gains inclusion rate are only expected to affect 0.13 per cent of Canadians with an average income of $1.4 million and only a small minority of businesses are expected to be affected, with only 12.6 per cent of Canadian businesses having capital gains in 2022.
Dean Stoltz
