Why do I Need a Henson Trust?
Since 1980, Ken has travelled province wide to meet with families and individuals, and presented seminars on Disabilities and Estate Planning issues and Henson Trusts. Ken is a Henson Trust specialist, providing financial security for families with a family member with disabilities or special needs.
A Henson Trust Protects Your Family and Your Estate
If a family member with special needs is receiving Ontario disability support benefits, and if they are left an inheritance, that inheritance is considered an asset and will disqualify them from benefits unless special arrangements are made in the parents’ Will.
The only real solution to this inequity is a HENSON TRUST, created by the parents’ Will. Only available since 1989, when the case after which it is named was upheld by the Ontario Court of Appeal, it places estate assets in the care and control of a Trustee to be administered for the benefit of a beneficiary. Inheritances placed in a properly prepared Absolute Discretionary Trust are not the asset of the child and will not affect provincial benefits.
Many families have members who require assistance in handling their daily affairs, regardless of their other abilities. Special Beneficiaries often benefit from guidance in handling large sums of money or significant assets, temporarily or on an on-going basis.
Some beneficiaries may be unable or unwilling to seek guidance, and may at some point be left without care unless special provisions are put into place.
To solve these problems a Henson Trust should be created, during your lifetime (inter vivos) or according to the terms of your Will (testamentary). These Trusts are invaluable in planning for your child’s care when you are no longer there, and they will provide peace of mind to parents who will then know that they have done everything that they can do to protect their disabled child's future.
These special arrangements are necessary to properly ensure that loved ones will be given the extra care they deserve, and that inheritances will not be wasted. Specialized legal counsel is necessary to ensure that the drafting of Wills follows the court-tested arrangements required, and to continually consider any changes in provincial regulations and new case law.
A Henson Trust is a specialized legal trust designed to protect a person with a disability’s Ontario Disability Support Program (ODSP) benefits. It allows a parent or caregiver to leave an inheritance without it being counted as an asset. The funds are managed by a trustee, who uses their discretion to provide for the beneficiary’s needs without disqualifying them from government benefits.
The main difference lies in control and discretion. A regular trust usually gives the beneficiary direct or partial access to the funds, which can disqualify them from ODSP benefits. A Henson Trust, however, is an absolute discretionary trust, meaning the trustee controls when and how funds are distributed. Because the beneficiary has no legal right to demand payment, the trust is not considered their asset under Ontario law.
The 5% rule refers to the practice of distributing approximately 5% of a trust’s total assets annually to ensure sustainable, long-term use of the funds. This guideline helps trustees balance current and future needs while preserving the trust’s capital for ongoing support. Though not a legal requirement, it’s a commonly used benchmark in estate and disability planning to ensure responsible trust management.
A Henson Trust and a Registered Disability Savings Plan (RDSP) serve different purposes and often work best together. A Henson Trust is ideal for inheritances and estate planning, protecting ODSP eligibility while providing flexible financial support. An RDSP, on the other hand, is a long-term savings vehicle with government grants and bonds, but strict withdrawal rules. Using both can provide short-term accessibility and long-term security for a person with a disability.
A Henson Trust can be created by parents, guardians, or loved ones through their Will (testamentary trust) or during their lifetime (inter vivos trust). Legal assistance is essential to ensure the trust meets all ODSP and provincial requirements.
Once a testamentary Henson Trust takes effect after death, it generally cannot be altered. However, inter vivos trusts established during one’s lifetime can sometimes be modified, depending on how they are drafted. Always consult a legal professional before making changes to avoid affecting ODSP eligibility.
While the trust itself may generate taxable income, distributions to the beneficiary are often not considered income for ODSP purposes if used appropriately. Trustees must follow tax reporting rules and keep accurate records to comply with Canada Revenue Agency (CRA) and ODSP guidelines.
Funds from a Henson Trust can be used for supplementary expenses that improve the beneficiary’s quality of life, such as personal care, recreation, transportation, home accessibility, or medical costs not covered by government programs. However, ODSP must not view payments as income replacements.
Families who have a child or loved one with a disability use a Henson Trust to ensure financial security, independence, and continued access to ODSP after they’re gone. It provides peace of mind by ensuring that inheritances are managed responsibly and that government benefits remain intact for the beneficiary’s lifetime.