Estate Planning
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Henson Trusts in Ontario: Everything You Need to Know

Written by
The Tabuchi Law Team
Published on
January 8, 2024

Henson Trust

A Henson trust is a type of trust that protects assets from creditors and lawsuits. It is named after the case of Henson v. Equity Trustees, in which the court held that a Henson trust could be used to protect assets from creditors.

High-net-worth individuals and families typically use Henson trusts to protect their assets from potential lawsuits or creditor claims. They can also be used to provide for beneficiaries in a tax-efficient manner.

Working with an experienced estate planning attorney to create a Henson trust would be best. The attorney will help you set up the trust and draft the documents.

Henson trusts can be a valuable tool for protecting your assets. If you are a high-net-worth individual or family, consider working with our experienced estate planning attorneys at Tabuchi Law to discuss whether a Henson trust is right for you.

What is a Henson trust?

A Henson trust is a type of trust that is designed to provide financial support for a disabled person. The trust is created by a settlor, who transfers assets to the trust. The trustee of the trust then manages the assets and distributes them to the beneficiary in a way that meets the beneficiary's needs.

Henson trusts often provide financial support for disabled children or adults who cannot manage their finances. The trust can provide for the beneficiary's education, housing, medical care, and other expenses.

Henson trusts are governed by the Henson Trust Act, which sets out the rules for creating and managing a Henson trust. The act provides for several safeguards to protect the beneficiary's interests, including the following:

  • The settlor must be at least 18 years old and of sound mind.
  • The beneficiary must be a disabled person.
  • The trust must be created for a specific purpose, such as providing for the beneficiary's education or medical care.
  • The trustee must be qualified to manage the trust assets and distribute them in a way that meets the beneficiary's needs.

Henson trusts can be a valuable tool for financially supporting disabled persons. They can help ensure that the beneficiary's needs are met in a way that is consistent with their wishes and protects their interests.

How does a Henson trust work?

The trust is created by a settlor, who transfers assets to the trust. The trustee of the trust manages the assets and distributes them to the beneficiary, who is the disabled person.

Suppose the court rules that a trust could provide financial benefits to a disabled person without being subject to the same rules as a discretionary trust. This would mean that the trustee of a Henson trust has more flexibility in managing the assets and distributing them to the beneficiary.

Henson trusts can provide for the disabled person's long-term care, such as nursing home care or assisted living. They can help ensure the disabled person has the resources they need to live a comfortable and independent life.

Who can benefit from a Henson trust?

A Henson trust can benefit a variety of people, including:

  • Individuals who want to protect their assets from creditors or lawsuits
  • Couples who wish to provide for their children after they die
  • Business owners who want to pass on their businesses to their heirs
  • People with special needs who need financial assistance

A Henson trust can provide several benefits, including:

  • Asset protection
  • Tax savings
  • Flexibility
  • Control

What are the benefits of a Henson trust?

There are many benefits to using a Henson trust, including:

  • Tax-free growth
  • Flexibility in terms of who can benefit from the trust
  • Protection from creditors
  • Control over the trust's assets
  • Easier to manage than other types of trusts

For more information on a Henson trust's benefits, please consult our friendly and highly experienced legal team at Tabuchi Law.

Conclusion

Henson trusts can be a valuable tool for estate planning and wealth management. They can provide flexibility and control over assets and help protect assets from creditors and taxes. However, it is crucial to understand the pros and cons of Henson trusts before deciding whether one is right for you.

If you have questions about Henson trusts, please call or email us at Tabuchi Law.

How to terminate a Henson trust

To terminate a Henson trust, follow the following steps: 

1. File a petition with the court: You must file a petition with the court that created the Henson trust. The petition must include the following information: 

  • The name of the Henson trust 
  • The name of the trustee 
  • The reason for terminating the Henson trust 

2. Provide notice to the beneficiaries: You must provide written notice to all of the beneficiaries of the Henson trust. The notice must include the following information: 

  • The date of the hearing 
  • The time of the hearing 
  • The location of the hearing 

3. Hold a hearing: The court will hold a hearing to consider the petition to terminate the Henson trust. The court will consider the following factors: 

  • The purpose of the Henson trust 
  • The needs of the beneficiaries 
  • The financial impact of ending the Henson trust 

4. Issue a ruling: The court will issue a ruling on the petition to terminate the Henson trust. The ruling will either approve or deny the petition. If the court approves the petition, the Henson trust will be closed. The assets of the Henson trust will be distributed to the beneficiaries according to the terms of the trust agreement. If the court denies the petition, the Henson trust will continue. The trustee will continue to manage the assets of the Henson trust and distribute them to the beneficiaries according to the terms of the trust agreement.

How to manage a Henson trust

Managing a Henson trust can be a complex task. Still, ensuring that the trust is managed according to its terms and objectives is crucial. Here are some tips for managing a Henson trust: 

  1. Appoint a trustee: The trustee is responsible for managing the trust and ensuring its assets are invested and distributed per its terms. The trustee should be knowledgeable about trusts and financial planning and can act impartially in the best interests of the beneficiaries.
  2. Invest the trust's assets: The trustee should invest the trust's assets in a diversified portfolio appropriate for the trust's objectives and risk tolerance. The trustee should also monitor the performance of the trust's investments and make adjustments as needed. 
  3. Distribute the trust's income and principal: The trustee is responsible for distributing the trust's income and principal to the beneficiaries per the trust's terms. The trustee should ensure the distributions are made on time and follow the trust's objectives. 
  4. Administer the trust: The trustee is responsible for administering the trust, which includes keeping records, filing taxes, and responding to inquiries from beneficiaries and other interested parties. The trustee should ensure that the trust is administered professionally and efficiently. Following these tips can ensure your Henson trust is aligned with its terms and objectives.

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Conclusion

A Henson trust is a powerful tool that can be used to protect assets and provide for loved ones. However, it is essential to understand the pros and cons of a Henson trust before making a decision. If you are considering using a Henson trust, consult our experienced estate planning attorneys at Tabuchi Law.

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