Judicial Basis for Henson Trusts: Disabled Children
Neufeld Legal P.C. can be reached by telephone at 403-400-4092 or email Chris@NeufeldLegal.com
The judicial basis and legal authority for Hanson Trusts emanate from the landmark case of Ontario (Director of Income Maintenance, Ministry of Community and Social Services) v. Henson (1989), which can be summarized as follows:
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The Facts: Leonard Henson of Guelph, Ontario, created an "absolute discretionary trust" in his will for the benefit of his daughter, Audrey Henson, who had a disability and was receiving government benefits through the Ontario Disability Support Program (ODSP). The trust was set up so that the trustee had complete and unfettered discretion to decide whether to give Audrey any of the trust's income or capital. Audrey had no legal right to demand a distribution from the trust.
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The Dispute: The Ontario Ministry of Community and Social Services argued that the trust assets should be considered Audrey's assets. This would have pushed her over the allowable asset limit for ODSP, causing her to lose her government benefits.
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The Ruling: The Ontario Court of Appeal sided with the Hensons. The court ruled that because the trustee had absolute discretion and Audrey had no enforceable right to the trust funds, the assets did not belong to her. Therefore, the trust assets could not be used to disqualify her from receiving government benefits. This decision established the legal foundation for what became known as the Henson Trust.
Almost three decades later, the Supreme Court of Canada had its first opportunity to address the legality of the Henson Trust in the case of S.A. v. Metro Vancouver Housing Corp. (2019), where it affirmed the validity of a Henson Trust, which can be summarized as follows:
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The Facts: A woman with a disability (referred to as "S.A.") was the beneficiary of a Henson Trust and was living in subsidized housing. The Metro Vancouver Housing Corporation (MVHC) determined that the trust was an "asset" and required her to disclose its value. When she refused, her rental subsidy was cancelled. The lower courts in British Columbia sided with MVHC.
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The Dispute: The central question was whether a Henson Trust constituted an "asset" for the purposes of a housing assistance program.
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The Ruling: The Supreme Court of Canada overturned the lower court decisions. The Court confirmed that a properly drafted Henson Trust does not give the beneficiary a "vested interest" in the trust's property. The Court described the beneficiary's interest as a "mere hope" of receiving a benefit, not a legal entitlement. As a result, the Court concluded that the trust assets were not an "asset" that could be used to disqualify S.A. from the rental assistance program.
These Canadian judicial decisions established and solidified the central legal features of a Henson Trust, which include:
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Absolute Discretion: The trustee(s) must have absolute and unfettered discretion to decide if, when, and how much of the trust's income or capital to distribute to the beneficiary.
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No Enforceable Right: The beneficiary must not have an enforceable right to compel the trustee to make distributions.
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Inability to Terminate: The beneficiary cannot unilaterally collapse the trust under the rule in Saunders v. Vautier, as they do not have an absolute interest in the trust's property.
The Henson Trust is now firmly established by Canadian courts as a valid and crucial estate planning tool, allowing families to provide for a loved one with a disability without jeopardizing their eligibility for means-tested government benefits.
Contact our law firm today to learn how our legal team can help you plan for the future or deal with the legal demands associated with the passing of a loved one. Contact our law firm at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule a confidential initial consultation.
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