Estate Planning: Disability Expense Trust & Henson Trust

Introduction

Planning for your family’s future after you pass away can be a daunting task. It is important that you put a plan in place to ensure that your wishes are fulfilled, and your family can be taken care of when you are gone. Preparation of a will can ensure that you and your family members are aware of what your wishes are should you pass. If you have family members with disabilities, there are special considerations that should be made to ensure these family members are not negatively impacted by their inheritance of your estate.

For persons living in Ontario with a disability the benefits they receive under the Ontario Disability Support Program (ODSP) can offer both financial assistance and benefits for prescription drugs and vision care. It is important for recipients and their family members to be aware of the restrictions on income and assets held by a recipient to ensure they continue to remain eligible to receive these benefits. Sometimes, parents or other loved ones use their wills to place assets into a trust for the benefit of the person with the disability but are unsure of what the limits on these trusts may be.

Facts

Income limits for ODSP recipients, including benefits received from a trust, were increased in 2017 to $10,000 dollars per year. There are exemptions for payments used for approved disability related items, services, education, or training expenses incurred because of a disability or payments used to purchase a principal residence or an exempt vehicle. Asset limits have also been increased and now sit at $40,000 dollars for an individual, $50,000 dollars for a couple, and an additional $500 dollars for each additional dependant that is not a spouse.

The creation of a Disability Expense Trust is one way of providing for family members who are in receipt of ODSP. Such a trust is inter vivos (created during the lifetime of the grantor of the trust) and can be used for the maintenance of a named beneficiary but under the current regulations are capped at $100,000 dollars. Another estate planning option is to place assets in a testamentary trust where the trustee maintains absolute and unfettered discretion regarding the trust assets. This type of trust has been named a Henson Trust after the case Ontario (Director of Income Maintenance, Minister of Community & Social Services) v Henson, [1989] O.J. No. 2093. The Supreme Court of Canada recently considered Henson Trusts in SA v Metro Vancouver Housing Corp., 2019 SCC 4, and ruled that a trust with absolute and unfettered discretion vested in the trustee will generally not be considered an asset for social programs. Henson Trusts can be established by parents and loved ones, through their wills, for the benefit of a person with a disability while not risking the beneficiary’s status in the ODSP program. The money paid out of the Henson trust will still be considered income unless it is used for an approved disability expense. Please contact one of our Wills & Estates lawyers if you are interested in establishing a trust for your loved ones.

Bottom Line

Estate planning is important for everyone to consider in order to ensure your final wishes are respected. If you have family members with a disability that you would like to include in your estate plan, it is important to be aware of the restrictions surrounding their eligibility in social programs. ODSP payments can be incredibly helpful for people in Ontario living with a disability. There are strict limits on assets held by a recipient and income received in order to remain eligible for the program. If you are interested in drafting a will, powers of attorney, establishing a Disability Expense Trust, Family Trust, or Henson Trust for your loved ones, please feel free to Contact Us.