This type of trust is often used by parents or donors who wish to bequeath property or money to a child or disabled adult. The purpose is to ensure that the beneficiary does not lose the ability to receive ODSP benefits. In creating the trust, the trustee has the absolute discretion in giving the beneficiary any income or capital. The property in the trust is not owned by the beneficiary and therefore is not included as an asset for the purposes of the ODSP.
The Henson trust is usually found in a will, but it can be established during the lifetime of the donor. This is called an Inter Vivos trust. It is a “private trust” where the proceeds come from an award, settlement or gift, but not an inheritance of insurance proceeds. If the trust is structured as an absolute discretionary trust and provided the trust is restricted in the distribution of the capital for the ODSP recipient’s maintenance, then the ODSP maintains his or her benefits. If, however, the trustee permits encroachment on the capital for the person’s maintenance, then ODSP considers the trust an asset and is therefore falls within the asset limits.
A Disability Expense Trust is quite different from the Henson Trust. The ODSP recipient is the beneficiary of an inheritance or life insurance proceeds directly (i.e. not through a trust). The trust is held by ODSP recipient and can use the funds for the person’s maintenance and support. ODSP treats this as an exempt asset up to a maximum of $100,000.
Factual considerations for Henson Trust
Age of the Beneficiary: ODSP is available from ages 18 to 65. At 65, the recipient receives CPP (if they qualify) and the other seniors’ benefits such as Old Age Security and Guaranteed Income Supplement. (But note: A person who is not eligible for the Old Age Security pension may be eligible for ODSP after the age of 65; Ontario Disability Support Program Act, Ontario Regulation 222/98, s. 4 (1)2.)
If the beneficiary is under 18, it is prudent to have the will include the Henson Trust.
If the beneficiary is near 65, it may not make financial sense to have the Henson Trust established.
In any event, the Trust should set out how the trust capital will be managed once the beneficiary turns 65. If the capital is turned over to the beneficiary, a Continued Power of Attorney for Property is recommended.