Henson trust

A Henson trust (sometimes called an absolute discretionary trust), in Canadian law, is a type of trust designed to benefit disabled persons. Specifically, it protects the assets (typically an inheritance) 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 has "absolute discretion" in determining whether to use the trust assets to provide assistance to the beneficiary, and in what quantity. This provision means that the assets do not vest with the beneficiary and thus cannot be used to deny means-tested government benefits.

In addition, the trust may provide income tax relief by being taxed at a lower marginal rate than if the beneficiary's total assets were considered. It can also be used to shield assets from matrimonial division in case of divorce 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 in the late 1980s. It became of wider interest when the Supreme Court of Ontario 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, or a testamentary trust.

The case

Leonard Henson of Guelph, Ontario had set up an absolute discretionary trust for his daughter. The Ontario Ministery of Community and Social Services took his daughter to court , arguging that she had assets. The Supreme Court of Ontario (later the Ontario Court of Appeal) ruled that she didn't have assets, as they weren't for her to use.

References

• Duties of a Trustee of a Henson Trust
• Henson Trusts: Providing for a Disabled Family Member
• Toronto Star