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.
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.
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 NULaw 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.
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