Henson Trusts and ODSP Eligibility for Disabled Beneficiaries in Ontario: A Comprehensive Guide

By
The Tabuchi Law Team
January 10, 2023
5
min read
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Henson Trusts

A Henson Trust is a special type of trust that allows people with disabilities to hold assets without sacrificing their eligibility for government benefits, such as the Ontario Disability Support Program (ODSP). Henson Trusts are named after the 1990 Supreme Court of Canada case Henson v. Ontario (Director of Social Services), which established the legality of these trusts.

Why do disabled beneficiaries need a Henson Trust?

Disabled beneficiaries need a Henson Trust because ODSP has strict asset limits. For example, a single person can only have up to $40,000 in assets to be eligible for ODSP benefits. If a disabled person inherits money or receives a personal injury settlement, their assets may exceed the ODSP limit, making them ineligible for benefits.

A Henson Trust allows disabled beneficiaries to hold assets without affecting their ODSP eligibility. This is because the assets in a Henson Trust are not considered to be owned by the beneficiary. Instead, the assets are owned by the trustee of the trust.

How does a Henson Trust work?

A Henson Trust is created by a settlor, who is the person who puts assets into the trust. The settlor can appoint a trustee to manage the trust on behalf of the beneficiary. The trustee can be a family member, friend, or professional trust company.

The beneficiary of a Henson Trust is the person who benefits from the assets in the trust. The trustee has the discretion to make payments to the beneficiary for their benefit, such as for medical expenses, education, or housing.

How to set up a Henson Trust

To set up a Henson Trust, you will need to create a trust deed. The trust deed is a legal document that sets out the terms of the trust, including the identity of the settlor, beneficiary, and trustee, as well as the powers and duties of the trustee.

Once you have created a trust deed, you will need to transfer your assets to the trust. This can be done by signing a transfer of ownership document.

Finally, you will need to register the trust with the Ontario Court of Justice. This is not required, but it is recommended to protect the assets in the trust from creditors.

Examples of how a Henson Trust can be used

Here are a few examples of how a Henson Trust can be used:

Example 1: Inheriting money

A disabled person inherits $100,000 from a deceased parent. If the disabled person keeps the money in their own name, they will exceed the ODSP asset limit and lose their eligibility for benefits. However, if the disabled person puts the money into a Henson Trust, they can keep their ODSP benefits and the money in the trust can be used for their benefit.

Example 2: Selling a home

A disabled person sells their home for $200,000. If the disabled person keeps the money in their own name, they will exceed the ODSP asset limit and lose their eligibility for benefits. However, if the disabled person puts the money into a Henson Trust, they can keep their ODSP benefits and the money in the trust can be used for their benefit, such as to buy a new home.

Example 3: Receiving a personal injury settlement

A disabled person receives a $1 million personal injury settlement. If the disabled person keeps the money in their own name, they will exceed the ODSP asset limit and lose their eligibility for benefits. However, if the disabled person puts the money into a Henson Trust, they can keep their ODSP benefits and the money in the trust can be used for their benefit, such as to pay for medical expenses, home renovations, or other needs.

Conclusion

Henson Trusts can be a valuable tool for disabled beneficiaries in Ontario. They can help disabled beneficiaries to maintain their ODSP eligibility and to use their assets for their benefit. If you are a disabled beneficiary in Ontario, you should consider setting up a Henson Trust if you have assets that exceed the ODSP asset limit.

Tips for setting up a Henson Trust

Here are a few tips for setting up a Henson Trust:

  • Work with a lawyer who specializes in estate planning and trusts.
  • Make sure that the trust deed is drafted carefully and that it meets the requirements of the Ontario Disability Support Program.
  • Choose a trustee who is trustworthy and who has the experience and expertise to manage the trust.
  • Fund the trust as soon as possible. The earlier you fund the trust, the sooner you can start using the assets in the trust for your benefit.

If you have any questions about Henson Trusts or how to set one up, please consult with a lawyer or other qualified professional.

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