You have an adult child receiving benefits from the Ontario Disability Support Program (ODSP), so you have a will that includes a Henson Trust to protect her ODSP after you have passed away. You have chosen one or more trustees to manage the assets in that Henson Trust because you believe they truly care about your child. But is that all they have to do – care? If it were only that simple.
In many respects, being a trustee is like having a job. Trustees have specific responsibilities that require particular skills and expertise. They have obligations to meet and guidelines they should not cross.
Here are three primary responsibilities not always considered:
Manage the assets in the Henson Trust
A Henson Trust can hold different types of assets. It can hold bank accounts, different types of investments (but not all types), and real estate, to name a few.
Trustees are legally obliged to manage these assets, “prudently”. Prudently does not necessarily mean conservatively. Investment selection must be in keeping with the needs of the beneficiary, which includes their income needs, and their long-term savings requirements. Other factors, such as market conditions, inflation and interest rates should also be taken into consideration when selecting investments.
Since these investment selection considerations are dynamic and subject to change, trustees are accountable for effective on-going investment management. The needs of the beneficiary will change over time, and so will market conditions, inflation and interest rates. Inevitably, investment portfolios need to be reviewed and revised.
Trustees should have a documented rationale for their investment strategy, which will be very helpful if they are ever questioned on their investment decisions.
If a Henson Trust contains real estate, trustees are responsible for managing the property. They have to make sure bills are paid, including heat, hydro, water, and property tax. When repairs are required, that is their responsibility too and it would be wise to secure and maintain written quotes for the bigger jobs.
Trustees who neglect these responsibilities or make poor decisions that unnecessarily impact the value of the Henson Trust can be held legally liable.
Report to ODSP
Trustees must report the transactions of Henson Trusts to ODSP. ODSP wants to know what amounts have been withdrawn from the Henson Trust and what were they used for. While assets in the trust do not affect the beneficiary’s eligibility for ODSP, withdrawals from the trust can easily jeopardize eligibility. There are limits on how much can be spent on non-disability related expenses, which is why ODSP wants to know about the uses of the funds.
Not only must they report to ODSP, but also have a basic understanding of ODSP restrictions and exemptions. Without this understanding, the financial and legal decisions they make could easily affect the beneficiary’s ODSP eligibility.
A tax return must be prepared and filed for Henson Trusts. Trustees must collect the necessary documentation each year and they are responsible for filing the appropriate tax forms with the government. They can hire an accountant to do the work, but the trustees are the ones ultimately accountable.
Related Article: The Henson Trust Has Its Limits
Too many trustees are left to figure it out all by themselves once they become trustees, because they were never really told about what was entailed or provided with a professional network to support them. Some have said it took them over a year to get up to speed and that the learning curve was very stressful. Mistakes are made along the way, creating more problems, some of them with nasty consequences that can have lasting effects for beneficiaries.
Before you shed your mortal coil, find professionals who can help your chosen trustees succeed when the time comes. There are lawyers, accountants and financial advisors, such as myself, who understand how to manage Henson Trusts and ODSP regulations. Introduce your trustees to these professionals, meet with them and start the conversation about responsibilities. Your trustees will need to improve their knowledge of investing, ODSP and possibly property management, but they do not have to become experts if they have the professional support.
I have held three-way meetings with clients and the people they have chosen as trustees of their child’s Henson Trust. They have proven to be very valuable meetings. Clients are more confident their legacy will be managed properly as their trustees gain an understanding of what their responsibilities will be and that they now know who I am and how I will be able to support them in the future.
Trustees, while sometimes a bit overwhelmed by the scope of their responsibilities, appreciate these meetings as well. They are relieved they get a head start. They can prepare themselves in many respects before they assume their responsibilities. These meetings spark questions the trustees can raise with the parents and reach out to professionals as well. Ultimately, these on-going dialogues improve planning. In the end, these trustees are capable of executing their duties when the time comes and, ultimately, the beneficiary – your son or daughter – will lead a better life.
Naming your trustee without educating them is like hiring somebody for a job and the only thing you do tell them is the job title. If you want them to be successful, competent trustees, you need to delve into the details. Educate them and provide them with the resources and supports they will need. Even highly competent people will deliver shoddy work if they are ill prepared or lack adequate guidance and counsel. Being a trustee is not an insurmountable task. It does take a trustee’s time and effort, but a trustee doesn’t have to feel they are in over their head. Talk about the key responsibilities and introduce them to professionals that can provide them with service, support and counsel.
Are trustees obligated to give the beneficiary of the trust an accounting of the withdrawals from the trust funds?
This is really a legal question. It is best that you speak to a lawyer about your situation.
Trustees have an obligation to manage the trust in the best interests of the beneficiary. Does this mean a trustee must provide an accounting of any and all transactions as each one is made? Not likely. Can a trustee be compelled to report on transactions and the assets in the trust? Yes.
Trustees can be compelled to provide a “passing of accounts.” This is a formal process which could be initiated by the beneficiary. The trustee would need to provide a formal accounting for the assets, income, disbursements, etc. for the trust.
Thank you for explaining that a trustee has specific responsibilities that require skills and expertise. My mom has mentioned that she wants to start putting to get her estate and will. I think she should hire a professional to help her do that soon.