Estate Planning can be fraught with difficult decision, particularly if beneficiaries of an estate include minors, or adults who are unable to manage their finances. Assets bequeathed in a will to a disabled beneficiary may impact their entitlement to collect government benefits or other entitlements. In the past, parents of offspring who collected government disability benefits had no legal mechanism to ensure their child’s right to continue collecting benefits, absent leaving a greater share of their estate to their other children. This meant there was no guarantee that they would ultimately share the estate’s assets equally with their sibling.
That changed in the late 1980s with the use of what is now called a “Henson Trust”. A Henson Trust is a term used to describe a trust established for the benefit of a person with disabilities (usually in the context of inheritance), where the trustee has absolute discretion in determining whether to use the trust assets to provide assistance to the beneficiary, and if so, in what quantity. Ontario (Director of Income Maintenance, Minister of Community & Social Services) v. Henson, 1989, 36 ETR 192 (Ont C.A.) involved an Ontario man named Leonard Henson who had set up an absolute discretionary trust for his daughter. The Ontario Ministry of Community and Social Services argued that the daughter was the owner of assets in the trust in denying her means-tested government benefits. The Court ruled that she was not the owner of any asset in the trust since the trustee had no obligation to pay her anything and she had no legal right to demand anything from the trust.
In 2017, and The British Columbia Court of Appeal ruled on a similar issue. In S.A. v. Metro Vancouver Housing Corporation, 2017 BCCA 2, S.A. was a person with disabilities residing in a subsidized rental unit operated by MVHC. In addition to operating subsidized rental units, MVHC administers a rent assistance program. On her rental assistance application, S.A., who had lived in MVHC’s housing complexes since 1992 and received rental assistance from MVHC every year until 2015, refused to provide the details regarding a discretionary trust of which she was the beneficiary of. The trust had been created for her benefit in 2012 and her sister acted as one of the trustees. MVHC declined S.A.’s application. In chambers, a judge found that the term “assets” included her interest in the trust. The Court of Appeal dismissed S.A.’s appeal, deciding that MVHC was entitled to require S.A. to provide information about the trust to determine both her eligibility for rent assistance, and whether she should receive assistance in preference to other applicants.
S.A. won her appeal at the Supreme Court of Canada. In a decision consistent with Henson, the Court ruled that S.A.’s interest in the trust did not form a part of her assets for the purpose of determining her eligibility for a rent subsidy from MVHC. The Supreme Court of Canada enumerated the essential features of the Henson trust:
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 this person cannot compel the trustee to make payments to him or her, and is prevented from unilaterally collapsing the trust; and
The word “assets” must be given its ordinary and grammatical meaning. A reasonable person who interprets the assistance application objectively would understand the word “assets” to mean an applicant’s property or interests in property that can actually be used to discharge their debts and liabilities, including rent.
This decision affirmed the Henson Trust; however, it does not prevent a social assistance program from explicitly including a Henson Trust in their definition of an “asset”. As such, careful consideration should be paid when contemplating the creation of a Henson trust, specifically with respect to the form(s) of government assistance the beneficiary currently receives and/or benefits they are anticipated to receive or be eligible for in the future.