A Henson Trust is a methodology by which a person making a Will (the testator) makes provisions for a disabled beneficiary, usually a child, without jeopardizing the beneficiaries’ ongoing government assistance. The most common scenario is a disabled child who is receiving monies under the Ontario Disability Support Plan (ODSP). The ODSP program will reduce its benefits dollar for dollar, if the recipient receives a benefit over a prescribed limit under a Will. Namely the problem was how to leave money to a beneficiary receiving disability benefits without barring them from receiving those ongoing benefits or suffering a corresponding reduction. The Henson Trust, named after a 1987 Ontario Divisional Court case, created an approved arrangement now commonly referred to as a Henson Trust and found in many Wills.
A Henson Trust is the creation of a completely discretionary trust, in the hands of the executors of one’s Will. It gives those executors complete and utter discretion to distribute as much of the income and capital of the estate or an amount set aside for one particular beneficiary as they see fit. It is that absolute discretion during the lifetime of the beneficiary that allows the Henson Trust to be characterized as never actually being received by the disabled beneficiary.
More simply put, it never belongs to the disabled beneficiary because it is distributed only if and when the executor wants to. If it is not within the disabled beneficiary’s control, it is not theirs and therefore does not interfere with the beneficiary’s receipt of ODSP or any government plan.The challenge of course is very carefully choosing an executor who will act as the trustee/administrator of the Henson Trust.
Not only must one very carefully choose an executor that one has absolute faith in, but the testator must keep one eye very carefully on the age of the executor/trustee. Often the partial or complete solution is naming a sibling of the disabled beneficiary as the executor. The risk of course is naming one of the executor’s siblings as the trustee of the Henson Trust only to find that person becoming disabled or dying long before the end of life of the disabled beneficiary.
In large estates, the solution, in the absence of such family members or a trusted executor, can be the appointment of a corporate trustee.Discuss this issue with your lawyer who is experienced in the drafting of Wills and understanding the interrelationship between a Henson Trust and the receipt of ODSP benefits.
By: Fred Streiman