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Henson Trusts

Before RDSPs there were not a lot of options for Parents of disabled children to protect the income they were saving for their child’s future. All options ended with paying a great deal of tax on it.

The RDSP helps a great deal with this, however before the RDSP another way to dissipate the impact of a disabled person receiving a large inheritance which could cause large tax implications and worse a loss of services and programs (due to the change in their financial status) was a Henson Trust (a specialized version of the Absolute Discretionary Trust).

I was going to attempt to explain Henson Trusts. Thanks to Mark over at the Blunt Bean Counter, he has a much better explanation with this one:

Estate Planning for Disabled Beneficiaries – Henson Trusts

By Katy Basi

The RDSP is a much “simpler” (for lack of a better term) program to work with in terms of setup. In some instances, the Henson Trust may be the only option available.

Note: This is a cheat on my part relying on other writers, but this has been sitting in my “To Do” list for a while. Please feel free to comment and ask questions, I will ensure I get some answers for you.

Also remember your loved one needs to have a Disability Tax Credit (DTC) for this as well. Evidently, I was mistaken, however, the ODSP is actually involved for Ontarians as well.

Feel Free to Comment

  1. Hi there. I was wondering if you have seen any info on a Henson trust owing part of a residential home. My father did another listen to Henson trust experts (too expensive) when he did his will. His will (created by a lawyer that has vanished) left the residential property 55% to one son (not disabled) and 45% to Henson trust for other son). Both are adults. My father died in November so this is the first time I’m seeing the actual wording of the will. I think this is going to be a mess.. Of course non disabled brother is the executor and doesn’t want to spend any money on any of this. Including probate. There are no other monetary assets (like cash) and they intend on keeping the house

    I could write a whole article on what my dad did wrong (and I may after this is done) but for now I am just trying to figure out this home ownership by Henson trust portion. Any articles or cases you can recommend are greatly appreciated.

    I am an accountant plus was involved in discussions with a lawyer and my father versed in this area prior to the will being done but I am also trying to not get sucked into this CF.

    1. Though you can place real estate into a trust, including a Henson Trust, somehow I doubt he can place part of a house in a trust. Most likely he would have to buy out his brother if he wants to keep the house. Then the proceeds can be placed into a Henson Trust. Not sure if probate would apply. I suspect it still does because it involves the sale of assets to execute part of the will.
      Looks like you will need some expert guidance on this one. Please share any findings.

    1. Ah well, here we have the Supreme Court talking about it last year:Supreme Court Releases Decision in S.A. v. Metro Vancouver Housing Corp. – Henson trusts are not “assets” for receipt of housing assistance

      Henson Trusts: Recognized and clarified by the Supreme Court of Canada
      In theory you might think that this means Henson Trusts are “home free”, however, there is no legislation about this yet is there? If not, more challenges may follow (maybe I am being skeptical, or just downright negative).

  2. Thanks for the article.

    One question that I have yet to see answered anywhere is timing. When can or should a Henson trust be created? Is it only at the time of death of the “donor”, i.e. as part of their will, or can this or should this be set up ahead of time?

    If part of a will, how does one educate the executor of all the ins and outs and the responsibilities around this?

    And if there is more than one will that tries to set up a Henson Trust, does it mean that since only one can exist, the second “donor” cannot set one up?

    And a question raised in the article but not answered is what happens to the funds after the disabled beneficiary passes? How to plan for that? What are the tax implications, etc?

    (I guess that is more than one question 😉

    1. Yes that is not just one question, but let’s see what I can do with this.

      According to one source: “…A Henson trust can be established as either a living trust, or a testamentary trust.”, thus it can be set up BEFORE you pass on.

      Educating the Executor? That is up to you, you should not be selecting an executor who does not understand the concept.

      I’ll look into the rest.

      1. Due to the new recent post, I find myself back here. Any further info on the remaining questions I raised some time ago? TIA.

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