Is Your Beneficiary Disabled & Receive ODSP? Everything You Need to Know About a Henson Trust.
What is a Henson/Inheritance Trust?
The Henson Trust is often used in estate planning to deal with situations where there is a disabled beneficiary who is entitled to receive support payments from the Ontario Disability Support Program (ODSP).
There are three essential elements of a Henson Trust. They are: (i) that the trustee must have absolute discretion, (ii) that the assets of the trust do not vest in the beneficiary, and (iii) that there is a gift-over following the death of the beneficiary.
Due to the fact that a Henson Trust beneficiary has no vested interest in the assets, nor any right to demand that the trustee pay them from the trust, the beneficial interest in a Henson trust isn’t taken into account in determining an individual’s assets. As such, the beneficiary is not required to treat the trust assets as his or her own. Consequently, the Henson trust provides a method of providing much needed additional income to a disabled beneficiary without causing them to become ineligible for ODSP.
If you are planning to provide financially for a person with an ongoing physical or mental disability after your death, a Henson trust can preserve a beneficiary’s entitlement to government income support and other benefits, without inadvertently compromising them. It is important to understand the intricacies of these trusts, various benefits available to disabled persons, and the best way to structure trusts in the event that more than one person plans to leave funds in a Henson Trust for a disabled beneficiary.
When an ODSP recipient is entitled to an inheritance, and there is no provision in the will of the deceased for a Henson Trust, the ODSP recipient may have to choose between losing ODSP payments or disclaiming their inheritance. An Inheritance Trust may allow the beneficiary to keep their ODSP and receive their inheritance in a trust created after the testator's death. The size of the Inheritance Trust is limited to $100,000 under current Regulations.
If you think an Henson Trust or Inheritance Trust may be the right solution for you or someone you care for, please get in touch.