A Henson trust (sometimes called an absolute discretionary trust), in

Canadian Canadians (french: Canadiens) are people identified with the country of Canada. This connection may be residential, legal, historical or cultural. For most Canadians, many (or all) of these connections exist and are collectively the source of ...

law, is a type of trust designed to benefit

disabled Disability is the experience of any condition that makes it more difficult for a person to do certain activities or have equitable access within a given society. Disabilities may be cognitive, developmental, intellectual, mental, physical, ...

persons. Specifically, it protects the assets (typically an

inheritance Inheritance is the practice of receiving private property, titles, debts, entitlements, privileges, rights, and obligations upon the death of an individual. The rules of inheritance differ among societies and have changed over time. Of ...

) of the disabled person, as well as the right to collect government benefits and entitlements. The key provision of a Henson trust is that the

trustee Trustee (or the holding of a trusteeship) is a legal term which, in its broadest sense, is a synonym for anyone in a position of trust and so can refer to any individual who holds property, authority, or a position of trust or responsibility to ...

has "absolute discretion" in determining whether to use the trust

asset In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...

s to provide assistance to the

beneficiary A beneficiary (also, in trust law, '' cestui que use'') in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example, the beneficiary of a life insurance policy is the person ...

, and in what quantity. This provision means that the assets do not

vest A waistcoat ( UK and Commonwealth, or ; colloquially called a weskit), or vest ( US and Canada), is a sleeveless upper-body garment. It is usually worn over a dress shirt and necktie and below a coat as a part of most men's formal wear. ...

with the beneficiary and thus cannot be used to deny means-tested government benefits. An example of such a benefit is the

Ontario Disability Support Program The Ontario Disability Support Program (ODSP) is a means-tested government-funded last resort income support paid for qualifying residents in the province of Ontario, Canada, who are above the age of 18 and have a disability. ODSP and Ontario ...

. In addition, the trust may provide

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Ta ...

relief by being taxed at a lower marginal rate than if the beneficiary's total assets were considered. However if the trust was established for a person with a disability in Canada, who has qualified for the

Disability Tax Credit The Disability Tax Credit (DTC) is a non-refundable tax credit in Canada for individuals who have a severe and prolonged impairment in physical or mental function. An impairment qualifies as prolonged if it is expected to or has lasted at least 12 ...

the trustees can use the "Preferred Beneficiary election" and attribute the trust income to the beneficiary of the trust without actually paying it out. The trust beneficiary would file a tax return as if they earned the trust income. The trust beneficiary would use their personal exemptions and tax credits to reduce their taxable income. It can also be used to shield assets from matrimonial division in case of

divorce Divorce (also known as dissolution of marriage) is the process of terminating a marriage or marital union. Divorce usually entails the canceling or reorganizing of the legal duties and responsibilities of marriage, thus dissolving th ...

of the beneficiary. In most cases, the trust assets are immune from claims by creditors of the beneficiary. The Henson trust was first used in

Ontario Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central Ca ...

in the late 1980s. It became of wider interest when the

Supreme Court of Ontario The Supreme Court of Ontario was a superior court of the Canadian province of Ontario. Created in 1881 pursuant to the Ontario Judicature Act (1881), the Supreme Court of Ontario had two branches: the High Court of Justice Division and the Appell ...

ruled in 1989 that the trust assets were not vested in the beneficiary and thus could not be used to terminate government benefit programs. A Henson trust can be established as either a

living trust A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...

, or a

testamentary A testator () is a person who has written and executed a last will and testament that is in effect at the time of their death. It is any "person who makes a will."Gordon Brown, ''Administration of Wills, Trusts, and Estates'', 3d ed. (2003), p. 556 ...

trust.

The Cases

Leonard Henson of

Guelph Guelph ( ; 2021 Canadian Census population 143,740) is a city in Southwestern Ontario, Canada. Known as "The Royal City", Guelph is roughly east of Kitchener and west of Downtown Toronto, at the intersection of Highway 6, Highway 7 and Wel ...

had set up an absolute discretionary trust for his daughter. The Ontario Ministry of Community and Social Services took his daughter to court (following a Tribunal decision overruling the case worker), arguing that she had assets. The Divisional Court (a branch of the Ontario Superior Court of Justice), as affirmed by the

Court of Appeal for Ontario The Court of Appeal for Ontario (frequently referred to as the Ontario Court of Appeal or ONCA) is the appellate court for the province of Ontario, Canada. The seat of the court is Osgoode Hall in downtown Toronto, also the seat of the Law Soc ...

, ruled that she didn't have assets, as the trustee had no obligation to pay her anything and she had no right to demand anything from the trust.''Ontario (Director of Income Maintenance, Minister of Community & Social Services) v Henson'', 1989, 36 ETR 192 (Ont C.A.). In 2019, the Supreme Court of Canada in S.A. v. Metro Vancouver Housing Corp., affirmed the Henson Trust. The Supreme Court held that a beneficiary of a Henson Trust has no vested interest in the trust. Further, the Supreme Court explained that the money the beneficiary received from a Henson Trust is not considered an "asset", as it relates to the policy of the Metro Vancouver Housing Corp. The Supreme Court did explain, however, that a social assistance program may explicitly include a Henson Trust as an "asset", at which point the money received may be considered an "asset".{{cite web , title=Can you put your trust in a Henson trust? Supreme Court of Canada says it depends , url=https://www.mcinnescooper.com/publications/can-you-put-your-trust-in-a-henson-trust-that-depends-says-the-supreme-court-of-canada-in-s-a-v-metro-vancouver-housing-corp/ , publisher=McInnes Cooper , accessdate=19 May 2020 , archiveurl=https://archive.today/20200520002418/https://www.mcinnescooper.com/publications/can-you-put-your-trust-in-a-henson-trust-that-depends-says-the-supreme-court-of-canada-in-s-a-v-metro-vancouver-housing-corp/ , archivedate=20 May 2020 , date=31 January 2019

Articles

Free Henson Trust eBookSupreme Court settles Henson Trust issueHenson Trusts: An Estate Planning Tool for AllHull & Hull commentary Henson CaseHenson Trusts have ancient roots

References

Law of Canada Wills and trusts