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Disabled Beneficiaries – Would a Henson Trust Benefit your Situation?

funeral preplanner Mississauga Ontario

Many Canadians are aware of the importance of having a valid will and powers of attorney document, yet, the importance of these documents is vastly underestimated in the special needs arena. Careful estate planning is necessary if persons with disabilities are to become beneficiaries of an estate. Individuals who live in Ontario should consider taking advantage of the Henson Trust when planning for their beneficiaries, who are recipients of ODSP benefits.

The name “Henson Trust” derives from a 1987 court case that dealt with a trust established in the will of Mr. Leonard Henson of Guelph Ontario, who wanted to leave his entire estate to his disabled daughter Audra. However if Audra “owned” significant assets or property then she would be ineligible to receive benefits under the Ontario Disability Support Program. However, the regulations do allow for a third party to have full discretionary powers to distribute the trust income and capital to the beneficiary as they see fit. This was Mr. Henson’s thinking when he drafted his will.

On his death, the will transferred his estate to trustees to act on Audra’s behalf.
The Ontario government still tried to withdraw Audra’s social assistance after Mr. Henson died and the matter ended up before the court. The case was finally resolved by Ontario Court of Appeal that ruled in favor of Audra. Although this decision came too late for Audra, as she died before the final ruling was made, this landmark decision had tremendous impact on the special needs community.

A person receiving benefits under the Ontario Disability Support Program Act is only allowed to own up to 5,000.00 in assets before potentially losing their ODSP benefits.

The Henson Trust is a fully discretionary trust in that the money does not vest with the beneficiary until the money is actually received by the beneficiary. In this way the beneficiary never “owns” anything nor has the right to receive anything unless the trustee elects to give the money to the beneficiary. As the beneficiary never really “owns” anything, then the money in the trust cannot be considered as an asset for the purpose of calculating their eligibility to receive ODSP benefits.

For the Henson Trust to work, it must be set up by a correctly drafted document. The Henson Trust can be set up as an inter-vivos trust in that it is established during the lifetime of the donor, or it can be set up in the will of the deceased. In this situation the trustee should be designated as the beneficiary of the RRSP or Life Insurance. The benefit is that the monies will pass to the trustee into the Henson Trust and your beneficiary under the disability will continue to receive the payments of ODSP benefits.

If this is your situation, there is a lot to consider in your estate planning, and the time is now to get things in order. I wish to thank my colleague Dorothy Hagel for contributing to and reviewing this blog. If you need more information please connect with Dorothy at 905-990-3440 or dorothy.hagel@dhestatelaw.com

As always, I welcome your feedback. You can connect with me via email or telephone, leave a comment here on the site or click the contact tab at the bottom of the screen if you are reading this post on the website. Don’t forget to join in the conversation on Facebook and Twitter too!

Until next time

Kat

Katherine Downey is the #1 Funeral Preplanning Professional in Canada for the fourth time. She is a professional educator, author, radio host, licensed funeral director and insurance advisor. To set an appointment or have your questions answered, please contact Kat directly.

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