The “Henson trust” is a type of trust that can be established in a careful estate planning to deal with circumstances where there is a disabled beneficiary who is entitled to receive support payments from the Ontario Disability Support Program (ODSP). The name of the Henson trust originates from an Ontario case, The Minister of Community and Social Services v Henson. In this case, the Court held that the beneficiary did not had the authority to direct the trustees to make payments to her. Therefore, since the beneficiary had no vested right to receive income from the trust, it would not result in a loss of government benefits. In other words, a Henson trust can be established to benefit disabled persons by protecting their assets while collecting government benefits. Through the Henson trust, the trustee decides the amount that will be given to the beneficiary and whether or not to transfer the trust assets to the beneficiary. Therefore, the assets are not in the beneficiary’s possession or name and the government cannot deny support payments to the beneficiary.
It is noteworthy to mention that under the Ontario Disability Support Program Act, if a recipient of ODSP has assets exceeding $5,000.00 (with some exceptions, including their principal residence and a vehicle), or receives income over a prescribed limit, they will not be eligible to receive ODSP.
The ODSP, however, often does not provide sufficient income. As such, if someone in the family is receiving ODSP and if they are to be given a large inheritance, then that may potentially disqualify the person from receiving support payments; unless of course, the testator includes a Henson trust provisions in the Will.
One other advantage of having a Henson Trust is that it allows the trustee to spend money from the trust for non-disability related things such as food, clothing, entertainment, etc., without affecting the disabled person’s disability benefits. On the other hand, it should be noted the Henson trust, is not a perfect answer. Two essential elements of a Henson trust are: (i) that the trustee must have absolute discretion, and (ii) that the assets of the trust do not vest in the beneficiary. As such, since the trustee has absolute discretion on the distribution of the trust assets and when they should be distributed, it is vital to choose a trustee that is absolutely trustworthy, who will not take advantage of their position.
Before making a Henson trust arrangement, consult with a lawyer to determine the best fit for the disabled beneficiary.