Elsewhere in our blog articles, we have discussed the creation of a Henson Trust. What happens if the testator/willmaker never created one? This can happen for various reasons, including where the deceased left no Will or if the disability took place after the Will was prepared. Sometimes, the willmaker fails to reveal to the lawyer the existence of a beneficiary’s physical and mental state.
Generally speaking, there is a $10,000 limit for receipts from a Henson Trust before any negative impact upon ongoing entitlement to ODSP, the Ontario Disability Support Program.
It is not uncommon for this situation to arise. What can estate trustees do to try and mitigate the negative effect upon a beneficiary’s ongoing receipt of ODSP. Remember that an inheritance is considered by the provincial government in determining the beneficiary’s ongoing entitlement and quantity of ODSP payments. There are several strategies that can be looked at and here are only some of them:
- There is firstly a $40,000 basic exemption in which one can have assets of this amount with no negative impact upon one’s ongoing entitlement to ODSP.
- One can use the funds to purchase a principal residence for the beneficiary, a vehicle or some product that is related to the recipient’s disability. While this sounds like an excellent idea, frequently if a person is so disabled as to be entitled to ODSP, the purchasing of a residence may not necessarily make sense.
- Another method is the ODSP existing restrictions permit an additional $100,000 segregated fund or trust being created for the beneficiary’s maintenance and support. It is almost as if retroactively a Henson Trust is being created for an individual, however it is now restricted to having no more than $100,000 within it.
- There are also various expenses that are not related to disability that one can seek pre-approval from the director of ODSP to allow those expenses to be paid without impacting ones’ ongoing entitlement to ODSP.
- Improving the ODSP recipient’s living condition by getting pre-approval from the director of ODSP. This could be used to renovate of the residence of the ODSP recipient, including furniture and perhaps even vacations for the beneficiary and even their personal care workers.
This area is extremely complex as involves the intersection not only of law but as well a government agency which is permitted to change its rules at its discretion. There are many learned papers on this topic which are beyond the scope of this blog. I would recommend for those parties that wished to further explore this area to look at the excellent paper contained within the 2021 Estates and Trusts Summit.