Henson Trusts Get Help From Courts And Government

Written on behalf of Arbesman Hamilton LLP

When families are preparing
their estate
to help look after a disabled relative, they may consider
putting money into what’s known as a “Henson trust,” which is a trust where the
beneficiary has no input into how the money is spent. Instead, all decisions
about how the trust’s funds are spent, are made by the trustee. Two recent
developments in Ontario have strengthened the reliability of Henson trusts.

A favourable decision
from the top court

On July 25 The Supreme Court of Canada issued a decision legitimizing the use of
Henson trusts as a way to prevent someone’s disability benefits from being
removed. The facts involved the Metro Vancouver Housing Corporation (“The
Landlord”) who provides affordable living spaces to people. Tenants may be
entitled to a subsidy. In order to qualify for a subsidized apartment, a tenant
must have less than $25,000 in assets. The tenant in this case has a
disability. When her father died, she was left one third of his estate. This landlord
believed this to have disqualified her from a subsidized apartment.

The Supreme Court of Canada found that the trust could not be
considered an asset, since it could not be used by the tenant in any way. The
only person who could make a decision about how the money spent was the
trustee. In fact, the trustee was not obligated to every provide the tenant
with money from the trust.

Help from the
government

As recently
reported
in the Globe and Mail, on
March 19, the federal government was removing “the
limitation on the amount of time that registered disability savings plans
(RDSPs) are permitted to remain open, with accumulated grants and bonds intact,
even if someone loses eligibility for the disability tax credit (DTC). Under
the existing rules, losing eligibility for the DTC meant that the investor had
to close the RDSP by the end of the next year and repay all grants and bonds
paid into the plan during the past 10 years. The rule would take effect after
the 2020 taxation year if the budget passes.”

The story reported that these updates will allow financial
advisors to establish RDSPs more confidently for their clients since they
wouldn’t be concerned with the risk of the plans being cancelled.

The estate lawyers at Arbesman Hamilton
LLP
have extensive experience in all areas of trust law, including Henson trusts
for disabled family members. Contact Arbesman Hamilton LLP in Toronto to obtain
proactive legal advice and plan your intergenerational wealth retention
strategy. Our experienced estate lawyers provide unparalleled personal guidance
for all your estate planning needs. Understand your options, minimize your
legal and financial risks, and protect your loved ones. Contact us online or at 416-481-5604 to
book a consultation today.