Can I Really Do That ... The Henson Trust in Nova Scotia

Last time we were discusssing the Henson Trust. Today we will start looking at some more practical issues around the use of a Henson Trust.

Validity of the Henson Trust in Nova Scotia

Apparently the Department of Community Services (DCS) takes the view that Henson Trusts are not valid in Nova Scotia. In other words, go ahead and set one up if you want, but you are wasting your time and money. Because we will take the view that your child has access to assets and thus they will be ineligible for benefits.

Here is the 'scoop' on that, according to Mr. Pope. And remember this when you go to a lawyer to create a Henson Trust, either in the context of your Will or otherwise (which we will discuss later).

Discretionary trusts will not protect your child's access to government benefits.

A discretionary trust is a type of trust where the Trustee is given discretion as to what types of investments to invest in and as to whether and when to distribute money to the beneficiaries. This type of trust is fairly common in a Will where one of the beneficiaries is a minor. Even though with this type of trust, the Trustee has the discretion to decide whether or not to distribute money to the beneficiary, this won't be sufficient for our purposes. Because with a discretionary trust, the beneficiary (your child, in this case) would still have the legal right to go to court and have the Trustee's exercise of discretion analyzed to ensure that it has been exercised reasonably. And if the court find that the Trustee has acted unreasonably, it can compel him to pay benefits to the beneficiary.

You will recall , however, that the Henson Trust is an absolute discretionary trust, meaning that the Trustee cannot be compelled (forced) to disburse money for the support of the beneficiary. In other words, your child, as the beneficiary of such a trust, will have absolutely no legal right to go to court and force the Trustee to provide any money to her. Theoretically, the Trustee could decide to never disburse any money from the trust and there would be nothing that anyone could do about it. But that is the crux of the matter, the good and the bad. That lack of control by your child is what is required to protect their access to government benefits. And also, incidentally, why you will want to choose your Trustee with great care. You are giving them a lot of power over your child's life.

So why is the Department taking the view that Henson Trusts are not valid in Nova Scotia and we are telling you otherwise? Apparently the DCS has a policy which would have the effect of making a person ineligible for assistance/benefits if they are the beneficiary under a Henson Turst. I can't comment on the exact wording of that particular policy as I have never, personally, seen it.

However, you will recall our earlier discussion about the relationship between legislation, regulation and policy that policy, with some limited exceptions, is not law. And polivy cannot disagree with the governing statute or any regulations made under that statute. Now, if the government chose, it could easily (subject to the political process, of course) pass new legislation or a regulation under an existing regulation stating that if an person is a beneficiary under a Henson Trust, they will be ineligible for government benefits. And unfortunately, that would be the end of this story. But that hasn't occurred.

What we have instead is a regulation passed pursuant to the Employment Support and Income Assistance Actwhich reads as follows:

58 Trust Money Where a sum of money is set aside in trust for an applicant or recipient or a spouse or dependent of an applicant or a recipient by a court or a person other than the applicant or recipient, assistance shall not be granted where it is feasible for the applicant or recipient to obtain support for himself or herself or his or her spouse or dependent child from the sum set aside.

This regulation only disqualifies someone from eligibility for benefitsif it is "feasible" for the person to "obtain support" for themselves from the trust. In the case of a Henson Trust, its not feasible. Its not feasible to force the absolute discretionary trust to support the recipient. That was the decision of the Ontario Court of Appeal in the Henson case  and although the matter has never been taken to court in Nova Scotia, the decision of the Ontario Court of Appeal should be highly persuasive to a Nova Scotia court if the isue ever gets there.  Although it has never been tested in Nova Scotia, this appears to be the generally accepted view by lawyers in the Province.

So, say what they might and although nothing is ever really guaranteed until the highest possible court has ruled on it, it is generally agreed that a Henson Trust is effective in Nova Scotia.

**With grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Societyfor 'bringing him to town'.  


Related Links

Protecting Your Child's Future with the Henson Trust

Draftting A Will When There's A Child With Disabilities