Trusts for Individuals with Disabilities – A Closer Look at Henson Trusts
Henson Trusts are a type of discretionary trust established and designed to benefit a disabled individual who relies on publicly funded social assistance benefits. The core principles of a Henson Trust were aptly described by the Supreme Court of Canada in S.A. v. Metro Vancouver Housing Corp.[1] as one where:
“the trustee is given ultimate discretion with respect to payments out of the trust to the person with disabilities for whom the trust was settled, the effect being that the latter (a) cannot compel the former to make payments to him or her, and (b) is prevented from unilaterally collapsing the trust”.[2]
The Supreme Court of Canada confirmed that to achieve the Henson effect, there must be a remainder (or gift over) of trust funds not expended during the lifetime of the trust; otherwise, the rule in Saunders v. Vautier,[3] might permit the recovery of the entire trust fund by the beneficiary.[4]
A Henson Trust enables a disabled individual to receive social assistance benefits as well as private monies held in a trust given, they have no enforceable right to receive any property from the trust. Unless and until the trustee exercises their discretion in that person’s favour the interest he or she has is not generally treated as an ‘asset’ for the purposes of means-tested social assistance programs.[5]
Henson Trusts in Ontario
In Ontario, consideration of Henson Trusts often considers a beneficiary’s entitlement to Ontario Disability Support Program (ODSP) benefits. As such, these matters are typically heard before the Social Benefits Tribunal (the “Tribunal”).
Ontario Regulation 222/98[6] (the “Regulation”) prescribes asset limits for ODSP recipients. Specifically, section 27(1) prescribes a $40,000 asset limit for a benefit unit that includes a single adult with no dependents and no spouse. Should a spouse or dependents be included in the benefit unit, this limit can increase by $10,000 for the spouse and $500 “for each dependant other than a spouse”.[7]
Section 28(1) of the Regulation prescribes the manner by which assets are determined and creates a large number of exemptions. In Guy v. Northumberland (County) Administrator, Ontario Works,[8] that court found that monies held in a trust were not considered to be assets for the purposes of determining eligibility for financial assistance.
The Tribunal in 1110-08605 (Re),[9] 2014 ONSBT 29 summarizes this principle well stating that:
In Ontario Works all funds held in trust are considered to be assets for the purpose of determining eligibility for financial assistance unless the Administrator is satisfied they are not available because they were out of reach of the recipient under the terms of the trust. In the Guy case, Ms. Guy’s two sons were beneficial owners of trust funds given to them through their grandmother’s will. Ms. Guy and her brother were trustees of the Will. They had discretion to use the funds for the benefit of the sons until they reached the age of 24 years. The amount of the funds was $8,588.12 (emphasis added).[10]
In 1804-02565 (Re),[11] the Tribunal affirmed the decision of the Director of the ODSP in cancelling benefits where the recipient exceeded the asset limits under the Regulation. The Director’s decision was on the basis that the recipient had $300,000 in a non-exempt GIC. The recipient was of the position that her assets did exceed allowable limits under the Regulation given the monies were being held in a Henson Trust and were therefore exempt.
However, the Tribunal found that the trust document and testimony put forward by the recipient did not demonstrate that the monies in questions were held in the sole discretion of the trustee and were sufficiently ‘out of reach’ for the purpose of calculating ODSP benefits.
Concluding Comments
The Henson Trust is a valuable mechanism for permitting disabled individuals to receive private monies for their benefit on top of ODSP assistance. A Henson Trust requires careful drafting and specific language to ensure the trustee’s power over income or capital permits them to determine how much, when and if the beneficiary is to receive trust monies.
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[1] S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4 (CanLII), [2019] 1 SCR 99 (“Metro Vancouver Housing Corp”).
[2] Ibid. at para 2.
[3] Saunders v. Vautier, [1841] EWHC J82.
[4] Metro Vancouver Housing Corp at para 2. The rule in Saunders v. Vautier permits beneficiaries of a trust (who are adults of full capacity) to call upon the trustee to terminate the trust and distribute the trust property.
[5] Ibid.
[6] O. Reg. 222/98: GENERAL (the “Regulation”).
[7] The Regulation at s.27(1).
[8] Guy v. Northumberland (County) Administrator, Ontario Works, [2001] O.J. No. 2166.
[9] 1110-08605 (Re), 2014 ONSBT 29.
[10] Ibid. at para 21.
[11] 1804-02565 (Re), 2019 ONSBT 2071 (CanLII).
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Written by: Oliver O'Brien
Posted on: November 28, 2024
Categories: Commentary, Trusts, WEL Newsletter
Henson Trusts are a type of discretionary trust established and designed to benefit a disabled individual who relies on publicly funded social assistance benefits. The core principles of a Henson Trust were aptly described by the Supreme Court of Canada in S.A. v. Metro Vancouver Housing Corp.[1] as one where:
“the trustee is given ultimate discretion with respect to payments out of the trust to the person with disabilities for whom the trust was settled, the effect being that the latter (a) cannot compel the former to make payments to him or her, and (b) is prevented from unilaterally collapsing the trust”.[2]
The Supreme Court of Canada confirmed that to achieve the Henson effect, there must be a remainder (or gift over) of trust funds not expended during the lifetime of the trust; otherwise, the rule in Saunders v. Vautier,[3] might permit the recovery of the entire trust fund by the beneficiary.[4]
A Henson Trust enables a disabled individual to receive social assistance benefits as well as private monies held in a trust given, they have no enforceable right to receive any property from the trust. Unless and until the trustee exercises their discretion in that person’s favour the interest he or she has is not generally treated as an ‘asset’ for the purposes of means-tested social assistance programs.[5]
Henson Trusts in Ontario
In Ontario, consideration of Henson Trusts often considers a beneficiary’s entitlement to Ontario Disability Support Program (ODSP) benefits. As such, these matters are typically heard before the Social Benefits Tribunal (the “Tribunal”).
Ontario Regulation 222/98[6] (the “Regulation”) prescribes asset limits for ODSP recipients. Specifically, section 27(1) prescribes a $40,000 asset limit for a benefit unit that includes a single adult with no dependents and no spouse. Should a spouse or dependents be included in the benefit unit, this limit can increase by $10,000 for the spouse and $500 “for each dependant other than a spouse”.[7]
Section 28(1) of the Regulation prescribes the manner by which assets are determined and creates a large number of exemptions. In Guy v. Northumberland (County) Administrator, Ontario Works,[8] that court found that monies held in a trust were not considered to be assets for the purposes of determining eligibility for financial assistance.
The Tribunal in 1110-08605 (Re),[9] 2014 ONSBT 29 summarizes this principle well stating that:
In Ontario Works all funds held in trust are considered to be assets for the purpose of determining eligibility for financial assistance unless the Administrator is satisfied they are not available because they were out of reach of the recipient under the terms of the trust. In the Guy case, Ms. Guy’s two sons were beneficial owners of trust funds given to them through their grandmother’s will. Ms. Guy and her brother were trustees of the Will. They had discretion to use the funds for the benefit of the sons until they reached the age of 24 years. The amount of the funds was $8,588.12 (emphasis added).[10]
In 1804-02565 (Re),[11] the Tribunal affirmed the decision of the Director of the ODSP in cancelling benefits where the recipient exceeded the asset limits under the Regulation. The Director’s decision was on the basis that the recipient had $300,000 in a non-exempt GIC. The recipient was of the position that her assets did exceed allowable limits under the Regulation given the monies were being held in a Henson Trust and were therefore exempt.
However, the Tribunal found that the trust document and testimony put forward by the recipient did not demonstrate that the monies in questions were held in the sole discretion of the trustee and were sufficiently ‘out of reach’ for the purpose of calculating ODSP benefits.
Concluding Comments
The Henson Trust is a valuable mechanism for permitting disabled individuals to receive private monies for their benefit on top of ODSP assistance. A Henson Trust requires careful drafting and specific language to ensure the trustee’s power over income or capital permits them to determine how much, when and if the beneficiary is to receive trust monies.
—
[1] S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4 (CanLII), [2019] 1 SCR 99 (“Metro Vancouver Housing Corp”).
[2] Ibid. at para 2.
[3] Saunders v. Vautier, [1841] EWHC J82.
[4] Metro Vancouver Housing Corp at para 2. The rule in Saunders v. Vautier permits beneficiaries of a trust (who are adults of full capacity) to call upon the trustee to terminate the trust and distribute the trust property.
[5] Ibid.
[6] O. Reg. 222/98: GENERAL (the “Regulation”).
[7] The Regulation at s.27(1).
[8] Guy v. Northumberland (County) Administrator, Ontario Works, [2001] O.J. No. 2166.
[9] 1110-08605 (Re), 2014 ONSBT 29.
[10] Ibid. at para 21.
[11] 1804-02565 (Re), 2019 ONSBT 2071 (CanLII).
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