Protecting Your Child's Future With the Henson Trust
 

The Henson Trust was named after an Ontario man who wanted to pass his entire estate onto his disabled daughter. But if she became the sole beneficiary of the estate and therefore "owned" significant assets and/or property, the government would consider her ineligible for any social assisatance payments. Meaning, for example, that if she lived in Nova Scotia, she would be ineligible for any of those programs we discussed under the Province's Services for Persons with Disabilities Program.

However, the releveant regulations did allow a person in her position to have some money in hand and didn't hold it against a disabled person when a third party provided a discretionary benefit.

For this reason, Mr. Henson drafted his will so that his entire estate was transferred to three trustees to be held on his daughter's behalf. The trustees (and this is the oh so very important part) had the discretion to withhold or spend the income and capital to best serve the daughter's interests. For example, money from the estate could be used to buy her a TV or new clothes or pay for a chaperoned trip. And because these payments were considered discretionary benefits, she still qualified for government support.

What the will didn't do was give the daughter a legal claim to demand money. Unlike the traditional trust that parents often set up in their wills for their minor children, Henson's daughter would never be in a position to go to court and claim that the trustees were wrongfully withholding trust monies from her. It was precisely because she had no legal claim to the monies that the government could not treat the money as hers after she inherited it.

Despite this, the government still saw fit to withhold the daugher's social assistance after Henson died. Which meant that she that she (or more accurately her guardian) was forced to take the matter to court. The Ontario Court of Appeal ruled that the daughter was eligible for continued government benefits and ordered the payments to be reinstated. Unfortunately, it was a hollow victory for Henson's daughter as she died before the Court of Appeal could rule in her favour.

But it was a significant victory for the disabled.

The trust that Mr. Henson set up has come to be known as a "Henson Trust" and now lawyers across the country have access to a vehicle that they can use in nearly every province to ensure that their clients can provide for their child without the loss of government benefits.

Or at least, that's the theory.

You will recall that in the past we briefly discussed the importance of having the trust provisions in your will drafted properly in a case where an individual with a disability is to be the beneficiary.Although the Henson Trust is currently considered to be active in every province except Alberta, the Northwest Territories and Nunavut, for it to be effective, trustees must have full blown discretion to distribute the estate's income and capital to the beneficiary as they see fit. From a legal point of view, this means that the beneficiary gains no vested right to income or capital under the trust. She cannot claim payments from the trust, she cannot demand them, and she does not, as a result, own the contents of the trust.

This has resulted in the need for wills to be worded, not just correctly, but precisely correctly. The will must be worded to provide complete discretion to pay out or withhold income and capital. Almost by the use of "magic words". And although the situation is improving, it would appear that some lawyers are unaware of the need for these "magic words" or even their very existence. Although we will go on to examine the Henson Trust and its status in Nova Scotia in more detail, the most important thing that you can take from this post is two-fold:

  1. The traditional trust arrrangement will not allow your disabled child to continue to receive government benefits after your death. Only a Henson Trust will accomplish this.
  2. The onus is on you, as the parent or guardian, to ensure that you locate and retain counsel that is competent in the use of the provisions of a Henson Trust. Unfortunately, this is a situation where, if its "done wrong", it will not be discovered until after your death. And while you, personally, will remain blissfully unaware of any problem, it will be your beneficiary who will pay the price.
**With grateful acknowledgment to Mr. Ken Pope and the Nova Scotia Downs Syndrome Society for 'bringing him to town'. 

 

Relevant Links:

Drafting A Will When There's A Child With Disabilities

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