A Henson trust has been a long-time staple in estate planning in Manitoba. It allows for a fund to be established by a family member containing any sum of money, whether large or small, in a trust which will not be held against the beneficiary in terms of social assistance eligibility. The trustee of the trust can make outlays of income and capital to improve the life of the beneficiary. The beneficiary remains eligible for social assistance. Thus, a parent with a disabled child will frequently set up a Henson trust in their Will. The technical requirements necessary for a Henson trust were established in two court cases, Quinn v Manitoba (Executive Director of Social Services) and Ontario (Director of Income Maintenance, Minister of Community & Social Services) v Henson. The requirements are, in essence, that the disabled person is to have no vested interest in the income or capital from the trust, and the trustee is to have a full and unfettered discretion in terms of making or not making distributions for the benefit of the disabled person. Put another way, the disabled person has no right to demand any income or capital from the trust at any time.
In operation, a Henson trust is typically used to pay for “extras” to enhance the quality of life of the disabled person. Those extras might include restaurant meals, chaperoned trips, and paying the costs associated with other entertainment or outings. These are the outlays that a parent makes for a child while the parent is alive and able to do so. With the Henson trust the parent simply creates the power for a trustee to pick up the same torch after the parent has dropped it.
New legislation has been announced in Manitoba, The Disability Support Act, which may have an impact on the operation of Henson trusts in Manitoba. It is recent, and we are still analyzing its import. However, changes appear to be coming related to the ownership and use of residential property and related to gifts and the treatment of other sources of income. It’s possible that with these changes, the treatment of trust distributions for the benefit of persons with disabilities will also change. Anyone interested in Henson trusts and their continued viability should be giving a careful read to the proposed legislation.
Krista Clendenning, LLB