Maximize the Benefits: Henson Trusts for Disabled Beneficiaries in Ontario

By
The Tabuchi Law Team
July 23, 2023
5
min read
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What is a Henson trust?

A Henson trust is a type of trust that is specifically designed to benefit disabled people. Henson trusts are also known as absolute discretionary trusts. This means that the trustee has the absolute discretion to decide how and when to distribute the trust assets to the beneficiary. The beneficiary does not have any legal right to the trust assets, and the trust assets are not considered to be assets of the beneficiary for the purposes of government benefits.

Why is a Henson trust important for disabled beneficiaries in Ontario?

Henson trusts are important for disabled beneficiaries in Ontario because they can help to protect their eligibility for government benefits, such as the Ontario Disability Support Program (ODSP) and the Registered Disability Savings Plan (RDSP).

ODSP is a financial assistance program for people with disabilities who have low incomes and few assets. ODSP benefits are based on the beneficiary's income and assets. If the beneficiary has too many assets, they may not be eligible for ODSP benefits.

The RDSP is a tax-advantaged savings plan that can be used to save for the long-term financial needs of people with disabilities. The federal government provides matching contributions to RDSPs, which can help to grow the savings faster.

Henson trusts can help to protect a disabled person's eligibility for ODSP and RDSP benefits by keeping the trust assets separate from the beneficiary's personal assets. The trustee can then use the trust assets to provide for the beneficiary's needs without affecting their eligibility for government benefits.

How does a Henson trust work?

When a Henson trust is created, the settlor (the person who creates the trust) transfers assets to the trust. The trustee then manages the trust assets and distributes them to the beneficiary at their discretion.

The trustee can use the trust assets to pay for the beneficiary's basic needs, such as food, shelter, and clothing. The trustee can also use the trust assets to pay for the beneficiary's medical and dental expenses, education, and other special needs.

The trustee does not have to distribute any of the trust assets to the beneficiary. However, the trustee must act in the beneficiary's best interests. This means that the trustee must consider the beneficiary's needs and wishes when making decisions about how to distribute the trust assets.

Who can create a Henson trust?

Anyone can create a Henson trust, as long as they have the mental capacity to do so. This includes parents, grandparents, other family members, and friends of disabled people.

What assets can be placed in a Henson trust?

Any type of asset can be placed in a Henson trust, including cash, investments, real estate, and personal property.

Who can be a trustee?

The settlor of a Henson trust can choose anyone to be the trustee. However, it is important to choose a trustee who is trustworthy and who has the experience and expertise to manage the trust assets prudently.

What are the benefits of a Henson trust?

Henson trusts offer a number of benefits for disabled beneficiaries in Ontario:

  • Protecting eligibility for government benefits: Henson trusts can help to protect a disabled person's eligibility for government benefits, such as ODSP and RDSP. This is because the trust assets are not considered to be assets of the beneficiary.
  • Providing financial security: Henson trusts can provide financial security for a disabled person for their lifetime. This is because the trustee can use the trust assets to pay for the beneficiary's needs, even if they are not eligible for government benefits.
  • Tailoring support to the beneficiary's needs: The trustee can tailor the support they provide to the beneficiary's individual needs. This may include paying for the beneficiary's basic needs, medical and dental expenses, education, and other special needs.
  • Peace of mind for the settlor: Henson trusts can give the settlor peace of mind knowing that their disabled loved one will be financially secure after they are gone.

Examples of how Henson trusts can benefit disabled beneficiaries in Ontario:

  • A parent can create a Henson trust for their disabled child. The trustee can then use the trust assets to pay for the child's needs, such as food, shelter, clothing, education, and medical care. This can help to ensure that the child has a good quality of life, even if they are not eligible for government benefits.
  • A grandparent can create a Henson trust for their disabled grandchild. The trustee can then use the trust assets to pay for the grandchild's needs, such as a down payment on a house, a car, or a business. This can help the grandchild to achieve their goals and live independently.
  • A friend can create a Henson trust for a disabled person they know. The trustee can then use the trust assets to pay for the person's needs, such as medical care, home modifications, or respite care. This can help the person to live comfortably and with dignity.

Conclusion

Henson trusts are a valuable estate planning tool for families with disabled beneficiaries. Henson trusts can help to protect the beneficiary's eligibility for government benefits, provide financial security, and tailor support to the beneficiary's individual needs.

If you are considering creating a Henson trust, it is important to consult with a lawyer who specializes in estate planning and disability law. A lawyer can help you to understand the legal requirements and to create a trust that meets your specific needs.

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