Planning for Persons with Disabilities
The following article is a summary of a comprehensive, 8-page RBC publication. The article considers the use of a Henson Trust as a planning tool for the ongoing care and financial support of a person with a disability.
When planning to provide financially for a person with an ongoing physical or mental disability, whether during your lifetime or after your death, care must be taken to ensure that the person’s entitlement to provincial and territorial disability related income support and other benefits are not inadvertently jeopardized. Generally, provincial or territorial disability related income support programs and benefits are income or asset tested, meaning that individuals cannot own certain assets or earn or receive income in excess of specified amounts. If these income and asset thresholds are exceeded, the person may be disqualified or ineligible to receive income support and other benefits until the excess assets are depleted.
One common tool that is often employed to preserve a beneficiary’s entitlement to government income support and benefits is a Henson Trust. A Henson Trust is a trust that provides the trustees with the absolute discretion to distribute income and capital from the trust to the beneficiary as they see fit. The trustees have full control as to when, if and how much income or capital is to be paid to the beneficiary. The beneficiary of a Henson Trust has no vested interest in the income or capital of the trust. This means that they cannot claim or demand payments from the trust and, consequently, they are not considered to own the trust assets.
The full 8-page article contains additional information, such as:
- History of Henson Trust and how it came to be
- Establishing a Henson Trust (planning in advance, how much, when)
- Tax Treatment of a Henson Trust (including potential changes as a result of the 2014 budget)
- Is a Henson Trust Appropriate? (consider how the preferred beneficiary election may impact the beneficiary’s eligibility for income support and benefits)
- Potential advantages
- Potential challenges
A Henson Trust can be an effective estate planning tool when planning for a beneficiary with a disability who benefits from provincial and territorial income support and benefits. It is imperative that you consult with a qualified legal advisor who is familiar with estate planning strategies for persons with disabilities to determine whether a Henson Trust is recognized in the proposed beneficiary’s province of residence and whether it is appropriate to set up a Henson Trust or use other estate planning tools. An improperly drafted trust may disqualify a disabled beneficiary from entitlement to government disability benefits. The information in this article is not intended to provide legal or tax advice.