Henson or Discretionary Trusts
Caring for a child with a disability, and determining the support they will require over time is a big responsibility. It is one that needs to be considered seriously along with a will and powers of attorney. One of the best ways to provide for children after you die is to make legal arrangements that maximize your estate when you are no longer there to look after them.
You have three options:
- You can fully support your child over his lifetime or until you die
- You can plan for the Ontario Disability Support Plan (ODSP) to take care of your child’s needs
- You can leave a trust fund for your child’s future
A Henson Trust is a type of trust designed to benefit disabled persons. It allows you to support your child without affecting ODSP. It protects the inheritance of the special needs person, as well as that person’s right to collect government benefits and entitlements. At the same time it allows the child to have some funds for extra expenses such as services they may need and holidays.
The key provision is that the trustee has “absolute discretion” in determining whether to use the trust monies to provide assistance to the beneficiary, and how much. This means that the monies cannot be used to deny government benefits.
In addition, the trust may provide income tax reductions by being taxed at a lower rate than if the total willed monies were considered. In most cases, the monies are immune from claims by creditors of the beneficiary.
Your decision to create a trust should be based on the following:
- Will you have assets/monies in your estate that you will leave to your child
- If the total amount is between $5,000 and $10,000, your child will lose ODSP without a trust set up
Please note that consideration should also be taken towards setting up a Power of Attorney for Personal Care and a Power of Attorney for Property. Samples of each are attached but using a professional to make lasting documents is recommended.
|Links or Useful Resources for HENSON TRUSTS:
Kenneth C. Pope -www.kpopelaw.ca or kpopelaw.com (includes podcasts)
The Special Needs Planning Group - www.specialneedsplanning.ca
Documentation on Power of Attorney, Mental Incapacity, etc. - www.attorneygeneral.jus.gov.on.ca
Community Legal Education Ontario – www.cleo.on.ca or phone 416-408-4420
Henson Trust Handbook (2008) in PDF format – www.reena.org/pdfs/hensontrust.pdf
J.E. Arbuckle – www.finplans.net