Trusts

A common tool used in estate planning for a disabled beneficiary is a trust. The terms of a trust are usually set out in writing in a trust document. A trust may be particularly useful where a beneficiary is not capable of managing their own financial affairs and/or you wish to protect a disabled beneficiary’s entitlement to provincial disability benefits

What is a Henson Trust?

The most well-known and commonly used Trust among families of people with disabilities is the Absolute Discretionary Trust, more commonly known as the “Henson” Trust.

It is a special type of Trust arrangement in which the Beneficiary is considered not to have any legal claim to the property held in Trust, and therefore, the property is not considered an asset of the Beneficiary when determining eligibility for ODSP.

In short, a Henson Trust renders the property invisible to ODSP for as long as the property remains in the Trust.

4 Key Criteria for an Effective Henson Trust:

  • Name the Trust
  • State Fully/Absolute discretionary trust
  • Address 21 year Accumulated Provision
  • Names a Residual Beneficiary

Using Henson Trust Funds:

  • A person can receive more than the $10,000 in a 12 month period but if they did, some of the excess would be deducted from the ODSP amount. In some circumstances, it may be appropriate to give up some of the ODSP benefits in favour of receiving more than the $10,000.
  • The beneficiary can receive additional funds over $ 10,000 for disability related costs (support workers, therapy, equipment, etc.)
  • The use of funds of the Henson Trust will be at the discretion of the trustee. They are the only people who can decide how the funds will be used for the person with disability. This is why it is critical to consider who you are appointing as trustees.

Trustee Considerations

You will need to appoint a Trustee to manage the Trust assets on behalf of the beneficiary and choosing this person (s) is very important. Some things you should take into consideration when choosing a trustee include:

  • Trustworthy & Sensitive to beneficiary’s needs
  • Understands ODSP rules / RDSP benefits
  • Longevity & Proximity
  • Joint & alternate trustees advisable
  • Watch for conflict of interest (is trustee also the residual beneficiary)
  • Appoint a Trust Company or Lawyer
  • Last resort – the Public Guardian & Trustee (PGT)

Henson Trust as an Estate Planning Tool

What is an Inheritance Trust?

An Inheritance Trust is another common type of Trust that may benefit a child with special needs is an inheritance Trust. This is a Trust created by the ODSP regulators to allow individuals in receipt of disability income benefits to receive an inheritance without voiding their benefits.

Important points to note:

  • Only gifts from a Will can be used to create this Trust
  • The beneficiary must have capacity to create this Trust, have an already established Continuing Power of Attorney, or a formal guardian in place.
  • You have 6 months to establish the Trust
  • Maximum value is $100,000
  • Income paid out from this Trust must meet ODSP income guidelines ($10,000 per year unless for exempt asset or disability related item).

An Inheritance Trust is good if a person has received an unexpected inheritance.

Other Important Trust Information

Here are some other areas that you should explore with a lawyer experienced in Special Needs and Disability planning:

  • A Qualified Disability Trust?
  • Intervivos Trusts
  • Housing Trusts
  • Lifetime Benefit Trust
  • Insurance Trust