Henson Trust: A Shield for Beneficiaries with Disabilities

DISCLAIMER 

This information is intended for business owners in Canada and serves as general guidance only. Always consult with a qualified advisor before making any legal decision.

Hi there! Steve Parr here, your trusted Wills and Estates Lawyer from the beautiful city of Vancouver, BC. Today, we will dive into an essential estate planning instrument, the Henson Trust. We will cover the following:

• The Henson Trust: what is it?

• Why would you need a Henson Trust

• Advantages and drawbacks

• The advantages are manifold

• Potential disadvantages 

• How to incorporate a Henson Trust 

• The practical applications 

• Estate planning can be intricate

The Henson Trust: What is it?

To begin with, what exactly is a Henson Trust? In estate planning, especially when a disability is involved, Henson Trusts are indispensable. It may seem like a complex term, but essentially, it is an arrangement tailored to secure the interests of disabled beneficiaries. A Henson Trust is a trust that is specifically designed to not disturb entitlements to government disability funding.

Originally from Ontario, the Henson Trust has become a widespread legal tool across numerous Canadian provinces. Created via a will, it assigns a trustee who has total control over disbursing the trust's assets to the beneficiary.

Why Would You Need a Henson Trust?

So, why would you need a Henson Trust? If a disabled person inherits wealth, they risk forfeiting their government benefits. These benefits often have stringent income and asset thresholds. 

A Henson trust bypasses this problem as the assets in the trust don't technically belong to the beneficiary, thus ensuring their eligibility for benefits remains unaffected.

Advantages and Drawbacks 

The advantages are manifold 

Primarily, it preserves a disabled individual's entitlement to government support. The trust's assets are not factored into the government's qualification assessment for aid. 

Furthermore, it guarantees a secure financial future for the beneficiary without impacting their access to disability assistance.

The trustee's discretion lies at the heart of a Henson Trust. The beneficiary does not control the trust's assets, and they can't demand payment or terminate the trust, thereby safeguarding the benefits they rightfully deserve.

It's essential to consider potential disadvantages of a Henson Trust. 

The trustee wields absolute discretion, which may lead to misuse. Therefore, the trustee's selection is crucial. They must be reliable and genuinely invested in the beneficiary's welfare.

An additional consideration is the potential conflict of interest when selecting residuary beneficiaries. For instance, appointing another child as the trustee may not be suitable if they're also a residuary beneficiary. As such, a thorough selection process is required to prevent these conflicts.

How to Incorporate a Henson Trust

Integrating a Henson Trust into your will requires careful legal wording, an understanding of the beneficiary's needs, and deep knowledge of provincial laws impacting its setup and operation.

Typically, the trust lasts for the disabled beneficiary's lifetime. The trustee can adjust income and capital distribution according to the beneficiary's needs. The remaining assets are distributed per your wishes upon the beneficiary's passing.

Choosing the trustee is a vital decision in this process. They hold significant authority over the trust, directly influencing the beneficiary's life quality. They should be responsible, trustworthy, and fully aware of the beneficiary's needs and lifestyle.

Mentally competent disabled beneficiaries can also be named as co-trustees. This approach allows them to actively participate in administering the trust, fostering a sense of involvement and independence. When multiple trustees are assigned, decisions should ideally be made by a majority rule, ensuring fair administration of the trust.

Practical Applications of Henson Trusts

In practice, Henson Trusts have demonstrated their value in real-life situations, offering financial security and peace of mind for families across Canada.

Consider a parent with a substantial estate and a single child with a disability. Without a Henson Trust, an inheritance could disrupt the child's disability benefits, undermining their financial stability. But with a Henson trust, the inheritance remains secure, and the disability benefits proceed undisturbed.

In situations with multiple children where one is disabled, the Henson Trust safeguards the disabled child's inheritance without compromising their entitlement to benefits. Non-disabled siblings can directly inherit their share of the estate. Hence, the Henson Trust ensures the fair distribution of assets while preserving the disabled child's rights.

Estate Planning Can Be Intricate

Especially when dealing with a disabled beneficiary. However, a well-constructed Henson trust offers a practical solution, preserving entitlements and ensuring financial security.

As with any legal arrangement, seeking expert advice is prudent, especially from professionals well-versed in Henson Trusts. Reach out to us for expert advice! Remember to plan wisely to secure a prosperous future for your loved ones.