Peterborough's Law Firm Since 1974

When a loved one collects government benefits, there exists a risk that an inheritance could result in disqualification. Families want their loved one to live a safe, comfortable life after they’ve died — without accidentally causing them to lose their vital government benefits. In Ontario, one of the most effective legal tools for protecting the disabled loved one is with a Henson Trust. 1. When Helping is Actually Hurting Many people with disabilities receive government support, such as: i. ODSP (Ontario Disability Support Program) ii. Subsidized housing supports iii. Prescription / medical benefits (the “ Benefits ”) The Benefits are often based on the applicant’s financial eligibility. In simple terms: If the applicant has too much money / resources / assets in their own name, they may not qualify / lose access to the Benefits. So how do family members (often parents) leave an inheritance for their disabled loved one (often a child)? The inheritance risks preventing the disabled loved one’s qualification or else disqualification from their Benefits. 2. A Solution: The Henson Trust A Henson Trust is a special type of trust purposefully designed to help a person with a disability receive financial support without owning the assets personally. A key feature of a Henson Trust is that it is a fully discretionary trust. The parent appoints a trustee right in their Will. The parent also identifies the beneficiary, which would be their disabled loved one. The important concept for a Henson Trust is that the trustee decides: i. whether to make payments to the beneficiary ii. how much or how little to pay or whether to make a payment at all iii. when to pay iv. what the money can be used for The beneficiary (the person with the disability) does not have the legal power to demand the money. The trustee has total authority over the Henson Trust. The term “fully discretionary” references that discretion of the trustee in all decisions surrounding payments from the trust to the beneficiary. 3. How Does a Henson Trust Protect Access to the Benefits? When a Will includes a Henson Trust clause, it allows the money to be set aside for the disabled loved one without disqualifying them from their Benefits. This is because the fully discretionary nature of the Henson Trust means whatever assets are inside the Henson Trust are never considered to be owned by the disabled beneficiary: i. The trust owns the inherited assets ii. The trustee controls the inherited assets iii. The beneficiary receives only whatever help from the trust that the trustee decides in their sole discretion Only once a payment is made from the trust to the beneficiary does the beneficiary own the property, but only in the amount of the payment that is actually advanced. 4. What Can a Henson Trust Pay For? A Henson Trust can be used to improve quality of life. For example: i. Furniture, clothing, and personal items ii. A vehicle or transportation costs iii. Travel and vacations iv. Therapy not covered by ODSP v. Education, training, or courses vi. Recreation and hobbies vii. Better housing arrangements (depending on structure) viii. Technology (phones, tablets, accessibility tools) The goal is often to provide “extras” that the Benefits don’t cover. 5. The Trustee – Tell Me More These are the important considerations when creating the Henson Trust: i. The trustee is in charge of the disabled child’s inheritance ii. The trustee will: a. manage the money b. make investments c. keep statements / records d. ensure the rules governing the Benefits are not breached during the management of the Henson Trust iii. Who should be trustee? a. a sibling b. a trusted family member c. a trusted friend d. a trust company e. a lawyer f. an accountant iv. Should I appoint multiple trustees? 6. How is a Henson Trust Created? In this context, a Henson Trust is created in a Will. If parents have a disabled child who collects ODSP, then the parents make an appointment with their lawyer to draft their Wills. In the Will, the lawyer prepares a clause that causes the share of the estate destined for the disabled child to be placed in the Henson Trust rather than go directly to the disabled child. By doing so, the parent is taking the correct steps to protect their disabled child’s qualification for their Benefits. A Henson Trust can also be created during the parent’s lifetime – called an inter vivos Henson Trust – but this is outside the scope of this article. 7. Important Considerations i. ODSP in par ticular has rules about income / gifts received during a disabled person’s qualification – not following the rules will result in disqualification ii. Whomever is appointed trustee must be reliable – a poorly managed Henson Trust can result in all kinds of different problems, not the least of which is disqualification from the Benefits iii. Registered Disability Savings Plan (RDSP) is an investment that could be used by the Trustee – but is not typically used instead of a Henson Trust iv. If a person has a family member who: a. receives ODSP (or might in the future) b. is or could be financially vulnerable (i.e. susceptible to influence or exploitation) c. makes poor / questionable financial decisions d. requires support then a Henson Trust may make sense in those circumstances. 8. Final Thoughts on Henson Trusts A Henson Trust is about more than the money. It’s created by someone who wants to provide an inheritance to a vulnerable person in order to: i. preserve dignity ii. provide stability iii. provide necessary supports iv. avoid interruption of government supports v. ensure that the support provided endures for years and decades The best time to set up a Henson Trust is before the crisis occurs – you do not want to die and leave your executors / beneficiaries scrambling. A well-crafted estate plan will protect both your estate assets and your vulnerable loved one. - Ian Keay