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Henson Trusts - an overview

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This Slideshare presentation gives an overview of Henson Trusts.

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Henson Trusts - an overview

  1. 1. Henson Trusts – an Overview
  2. 2. • A Henson Trust is a kind of trust typically used as an estate planning tool in circumstances in which a beneficiary is entitled to receive support payments from the Ontario Disability Support Program ("ODSP") • Henson trusts give absolute discretion (or control) to the trustee(s) in making distributions to the beneficiary(ies) of the trust • A Henson Trust is sometimes referred to as an absolute discretionary trust What is a Henson Trust?
  3. 3. • The name “Henson Trust” originates from the 1987 Ontario Divisional Court decision in Minister of Community and Social Services v. Henson, [1987] OJ No 1121, aff’d [1989] OJ No 2093 (Ont CA) • Ms. Henson was the beneficiary under the Last Will and Testament of her father, Mr. Henson • Ms. Henson had a disability that entitled her to an allowance under the former Family Benefits Act • The Family Benefits Act stated that the recipient of benefits would end when his or her “liquid assets” exceeded $3,000 in value • Liquid assets were considered to include cash, and any assets that could easily be converted into cash: bonds, stocks, debentures, real property interest, and a beneficial interest in assets held in trust • Ms. Henson’s entitlements under Mr. Henson’s Will were greater than $3,000 – the Court was required to examine the terms of the Will regarding the gift to Ms. Henson to determine whether she was disqualified from receiving her Family Benefits Act allowance Background
  4. 4. • The Court’s decision depended on how the gift of Mr. Henson’s assets was to be made to Ms. Henson • Mr. Henson had provided for a trust for Ms. Henson’s benefit, but gave “absolute, unfettered discretion” to its trustees • This meant Ms. Henson had no vested right to receive income or capital from the trust – the trustees could choose to make distributions from the trust funds to Ms. Henson or they could choose not to do so • Ms. Henson could not force the trustees to make payments to her to meet her needs if there were not funds available to her under the Family Benefits Act • As a result, the Court held that a discretionary trust established for a beneficiary with a disability would not result in a loss of government benefits “Absolute, unfettered discretion”
  5. 5. • The ODSP Act’s regulations were recently amended to increase the amount of assets that can be held without affecting ODSP entitlements. • As of September 1, 2017, to remain eligible for ODSP, a recipient may have a maximum of: • $40,000 worth of assets for a single person (formerly $5,000); or • $50,000 worth of assets for a couple if in a spousal or marriage-like relationship (formerly $7,500). • The amendments to the ODSP Act also increased the funds that a recipient of ODSP benefits can receive from a trust, life insurance policy, or other gift during a 12-month period without impacting benefits to $10,000.00 (from $6,000.00). • Gifts and inheritances should be carefully planned so that a beneficiary with a disability does not lose government benefits. • When used effectively, Henson Trusts can be used to provide some provisions to a beneficiary with a disability without disqualifying him or her from any ODSP benefits. Henson Trusts Today
  6. 6. • As Henson Trusts rely on the absolute discretion of the trustee, the testator (the person who executes the will) should carefully select one or more trustees that will not take advantage of their important position • While they can be used to manage the assets within a person’s possession, Henson Trusts cannot be used to get around rules with respect to income limits for recipients of ODSP benefits • It is important that the payments to the beneficiary from the trust still do not exceed the income limits set out by the ODSP Act • Important Considerations Related to Henson Trusts •
  7. 7. Thank you for reading!

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