Henson Trusts – Planning for persons with disabilities

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 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 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 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 they can’t claim or demand payments from the trust and, consequently, they are not considered to own the trust assets. A Henson Trust can be set up as an inter-vivos trust (established during your lifetime) or as a testamentary trust (established on death under the terms of your will). A Henson Trust cannot be settled by the disabled beneficiary

Henson Trusts are subject to provincial and territorial regulations and are generally available to be used as a strategy in most provinces and territories. It’s imperative that you consult with a qualified legal advisor to determine whether a Henson Trust is recognized in the beneficiary’s province of residence before utilizing this tool.

A. Craig Elder, CFP, FMA, CIM, FCSI, is a Senior Portfolio Manager and Wealth Advisor with Elder & Punko Wealth Advisors of RBC Dominion Securities Inc. in Medicine Hat www.elderpunkowealth.ca . Source material provided by RBC Wealth Management. RBC Dominion Securities is a member of the Canadian Investor Protection Fund. For more information on this and other financial strategies, contact Craig at craig.elder@rbc.com or 403-504-2723.