Provincial disability benefits can help you look after your child financially and can provide other indirect benefits, such as access to special services. However, you may still worry about what will happen to your child after your death. Who will care for your child and how will their finances be managed? Disability benefits are not guaranteed and could potentially be drastically reduced—or even discontinued—in the future. If you leave an inheritance or life insurance proceeds directly to your child, his or her assets could increase enough to disqualify him or her from receiving provincial disability benefits.
Introducing Henson trusts
A Henson trust is a fully discretionary trust designed specifically to benefit persons with disabilities.1 It manages the trust assets and seeks to protect these assets (typically an inheritance) from being considered to belong to a person with a disability, so that person will remain eligible to collect government benefits and entitlements.
It is named after a 1987 case in which the Ontario government tried to disqualify Audrey Henson from receiving her provincial disability benefits because of money left to her in a testamentary trust. In the end, the Court of Appeal ruled that the trust assets were not available to Ms. Henson and she could still collect government benefits.
Benefits at a glance
- allows you to use capital—or other assets, including proceeds of permanent life insurance—to fund the trust
- allows you to authorize a trustee to pay for anything your child requires
- endeavours to protect your child’s eligibility for future disability benefits by giving the trustee full discretion over trust payments
- directs the trustee on how to distribute any remaining balance to other beneficiaries at some future point; for example, upon the passing of your child
Choose someone you trust
Your choice of trustee is critical. You should ensure that this person has the technical ability to manage such a trust, is willing to take the time necessary to care for your child’s needs, and is available to provide guidance and support. You may wish to consider the benefits of hiring a professional executor,2 as well as a trustee like MD Private Trust. This will ensure that the needs of your child are always the top priority.
How a Henson trust works
Because the trustee has full discretion over trust payments to your child, your child’s interest in the trust is typically not considered an asset that would affect his or her eligibility for provincial disability benefits. The trustee can use the trust funds to pay for any extras that your child requires, within provincial rules, and can keep the bulk of the trust funds intact for any future needs.
A Henson trust can help you strike the desired balance—maximizing the benefits your money can provide to your child after you are gone, while striving to protect his or her disability benefits as much as possible. You will have peace of mind knowing that your child will continue to receive appropriate care and benefits after your death.
Consult with your MD Advisor to see if setting up a Henson trust is appropriate for your special-needs child.