Providing for Disabled Beneficiaries: The Supreme Court of Canada and Henson Trusts
If you are preparing your will and you want to leave a gift for a beneficiary who is disabled, you need to ensure that you are receiving advice regarding the best way to provide for your loved one after your death.
There are various ways to provide for a disabled beneficiary after your death. One way is to consider creating a “Henson Trust.” A Henson Trust is an absolute discretionary trust, meaning the Trustee has absolute discretion over distributions from the trust. Creating a Henson Trust will allow your beneficiary to continue to receive government supports such as income and benefits through the Ontario Disability Support Program (ODSP). This is because the Henson Trust will not be considered an asset of the disabled person. It is essential that the Henson Trust be carefully drafted and the discretion of the Trustee must be absolute.
The Supreme Court of Canada recently confirmed the use of Henson Trusts as a valid estate planning tool. In the decision of S.A. v. Metro Vancouver Housing Corp., the appellant was seeking to have the Henson Trust, which was set up for her in her father’s will, excluded as an asset in determining her eligibility for a rent subsidy. The trial judge and Court of Appeal both held that the trust was an asset and that information about its value had to be disclosed. The Supreme Court of Canada overturned the decisions of the lower court and found that, insofar as the manner in which “asset” was defined by the Housing Corporation, the Henson Trust was not an asset she was required to disclose.
In its reasoning for the decision, the Supreme Court held that because the trust was absolutely discretionary and the beneficiary did not have the right to collapse the trust, the appellant’s interest was not such that it could be considered her asset – she had no right to access the property. The definition of “asset” was also an important consideration in the Supreme Court’s decision and while the Henson Trust was not considered to fall under the definition of “asset” in this case, depending on the definition in other eligibility policies for other programs, it is possible that a Henson Trust may not be exempt. Although this decision originates from a case in British Columbia, the reasons apply in Ontario and to beneficiaries located here.
If you would like more information on Henson Trusts or other estate planning topics, please contact one of our Wills and Estates lawyers.