When a loved one collects government benefits, there is a risk that receipt of an inheritance could result in disqualification. Families want their loved one to live a safe, comfortable life—without accidentally causing the loss of vital government benefits.  In Ontario, an effective legal tool for protecting a disabled loved one is by including a Henson Trust in the Will. 

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”)

Qualification for and receipt of 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? A badly drafted Will can result in an inheritance that risks the recipient's disqualification from the 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 Henson Trust provision is written directly into a Last Will & Testament.  A key feature of a Henson Trust is that it is a fully discretionary trust. The Will-drafter (parent) appoints the trustee of the Henson Trust in their Will. The parent also identifies the beneficiary (disabled child). The important concept for a Henson Trust is that the trustee has sole and absolute discretion:

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 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 it is the trustee that has total discretion in all decisions surrounding payments out of 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 requires the inheritance to be set aside for the disabled beneficiary.  The "setting aside" is what prevents the disqualification. This is because the fully discretionary nature of the Henson Trust means whatever inheritance lands inside the Henson Trust can never be 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 that property, but only in the amount of the payment that is actually advanced.  The goal of the Henson Trust is to ensure the trustee only makes payments in amounts that keep the disabled beneficiary qualified.

4. The Trustee – Tell Me More

These are the important considerations when creating the Henson Trust.  In particular, who should be named as the trustee.  Factors to consider are:

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?

5. 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. 

6. Important Considerations

i. ODSP in particular 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.

7. 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