By Manbir Gill, Barrister & Solicitor
What is it?
When drafting a Will, a Henson Trust is inserted where one or more of the beneficiaries have a disability and receive income and benefits from Ontario Disability Support Program (“ODSP”). This program allows for the recipient to receive income and other health and medical benefits to assist with their disability.
The Court Case that created the Henson Trust
The Case that helped to create the Henson trust involved a father, Leonard Henson who created a discretionary trust to ensure that his daughter could receive her inheritance without losing the ability to receive social housing benefits due to her disability. This caused the Ontario Ministry of Community and social Services to take Mr. Henson’s daughter to court arguing that she had assets. However, the court ruled in her favour stating that she did not as there was no obligation for the Trustee to pay funds from the trust to her and she in turn could not demand funds from the Trust. This was later upheld by the Supreme Court of Canada.
Why do we need it?
Typically, when someone is receiving income from ODSP, they will have a set number of hours they can work, income that they can earn and assets that they are allowed to have in their name. Under this definition of income and assets, what is also included are any inheritance received from an estate. This poses an issue when it comes to estate planning, as an inheritance received by a person who is an ODSP recipient could cause that person to lose their entitlement especially if the value of inheritance is more than what is allowed by ODSP.
How does it work?
A Henson Trust works differently from standard inheritance, typically an inheritance received is paid directly to that beneficiary. However, when it comes to a Henson Trust, the Will nominates a trustee who will manage the Henson Trust. The inheritance is then held in a trust that does not “vest” with the beneficiary, this is crucial as the funds therefore are not wholly owned by the beneficiary, rather it is owned by the Trust. The trustee then acts in accordance with the trust by providing only the amount of inheritance that is allowed under the stipulations of ODSP.
What characteristics should your Trustee have?
Discretion
As stated earlier the Henson Trust must provide complete discretion to the Trustee of the trust. One thing that should be kept in mind is that beneficiaries receiving ODSP have constantly changing lives and the amount they are able to receive from the Trust can fluctuate. The Trustee needs to understand this and know that the payment made to the beneficiary could change as time goes on.
Diligence
Your Trustee needs to be diligent, as the income and value of assets allowed under ODSP frequently change, your trustee needs to be diligent in ensuring that they are not providing more than what is allowed. A trustee can prevent this by being in frequent contact with the beneficiary or their guardian to ensure that they are providing the correct total.
Trustworthy
As the Henson Trust is at the discretion of the Trustee, the person you choose should be Trustworthy. The Trustee could possibly oversee disbursing significant funds to your beneficiary, with this responsibility you would want a Trustee that takes it seriously and ensures that the limit is reached on what your beneficiary will receive. As the other beneficiaries could stand to benefit from a cautious Trustee who does not disburse adequate funds, it is best to have someone trustworthy.
Commitment
Finally, a Henson Trust is a commitment and therefore the Trustee should be equally as committed. A Henson Trust has the potential to last for a significant period of time, therefore the Trustee chosen should be someone who understands this and is committed to ensuring that the Trust is disbursed.