A “Henson trust” is an increasingly popular way to provide for a disabled beneficiary. This blog post will summarize what makes a trust a Henson trust and the legal implications of Henson trusts for its beneficiaries.
Our colleagues, Natalia Angelini and Nick Esterbauer, have previously podcasted on the case of S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4 (CanLII), in which the Supreme Court of Canada addressed Henson trusts. We’ll use this blog as a brief refresher on the subject for our readers.
Key features of a Henson trust include:
- They benefit a disabled person who receives public social assistance benefits;
- The trustee has ultimate discretion over payments out of the trust to its beneficiary;
- The beneficiary cannot compel the trustee to make payments out of the trust and cannot unilaterally collapse the trust; and
- Since the beneficiary has no enforceable right to receive property from the trust, their interest in the trust is not generally treated as an asset.
Since Henson trusts are not treated as assets, they can be an effective way to set aside money or property for a disabled beneficiary without jeopardizing their eligibility for social assistance benefits.
In the aforementioned decision of S.A. v. Metro Vancouver Housing Corp., the Supreme Court of Canada held that a disabled tenant’s interest in a Henson trust did not disqualify her from eligibility for rent subsidy. The Court found that the tenant had no enforceable right to receive anything unless and until the trustees exercised their discretion in her favour.
An interesting added wrinkle to the case was the fact that the beneficiary of the trust was also a co-trustee. But for the Court, the tenant’s status as co-trustee did not change the fact that, under the terms of the trust, she had no fixed entitlement to assets and could not unilaterally collapse the trust for her benefit. This illustrates the importance of examining the facts of each case carefully.
Thank you for reading and have a great day!
Suzana & James Macfarlane