Setting up a Henson Trust
What Does It Take To Be A Successful Trustee Of A Henson Trust?
Agreeing to be the trustee of a trust is easy. Being the trustee of a trust is a different story. A Henson Trust helps to protect the beneficiary’s disability income and health benefits received from the Ontario Disability Support Program. Assets in a Henson Trust do not affect the beneficiary’s ODSP benefits. But, ODSP policies limit the amounts that can be withdrawn from a Henson Trust. Money withdrawn from a Henson Trust would affect the beneficiary’s ODSP eligibility or the amount they receive is dependent on several factors.
You have heard of a Henson Trust but how do you set one up?
You have an adult son or daughter who is receiving assistance from the Ontario Disability Support Program (ODSP) and you know leaving them with an inheritance in their name after you die could easily spell the end to their ODSP benefits. Instead of naming your child as a direct beneficiary of your assets, you have been told you should put those assets in a Henson Trust to protect their ODSP. Assets in a Henson Trust will not affect their eligibility for ODSP
So how to you set up a Henson Trust?
A Henson Trust is part of your estate plan. It is drafted by a lawyer. But don’t go to just any lawyer. Even an experienced trust and estate lawyer would not earn my recommendation unless they have a strong understanding of ODSP and the relevant estate planning strategies parents of children with disabilities should consider using. “Standard” estate planning (as if there were such a thing) does not apply to you. You have to work within a different set of rules. Your lawyer needs to understand those rules. If they have not worked with many other families like yours, don’t expect them to understand those rules.
There are trust and estate lawyers who specialize in estate planning for parents of children with special needs. Not only do they understand ODSP, but also the Registered Disability Savings Plan, and other disability related matters. As well, they stay abreast of changes in relevant legislation. They are the ones who will lead you through how to set up a Henson Trust if in fact, this is the type of trust that you need.
Once you find a suitable lawyer, you will also need to identify trustees for the Henson Trust. These should be people that you truly trust with your child’s well-being. In addition to having your child’s best interests at heart, they should have the skills to manage the trust. They should have a basic understanding of ODSP restrictions and exemptions. They should be able to file taxes on behalf of the trust. They will need to manage the assets in the trust which could include bank accounts, investments and real estate. They do not need to be experts in these areas, but they will need to be able to talk with and provide direction to professionals who do have the expertise.
To support the trustees you select, you should find and start working with the professionals you want your trustees to rely upon for service and advice. While there are not many, there are a growing number of accountants and financial professionals like myself who specialize in the area. Start working with them now. Have them file your taxes and help you with your investments and insurance. And then connect them to each other. Our best work is typically done in collaboration with each other and it saves you from being caught in the middle where things are often lost in translation.
You should also introduce the trustees to your lawyer, accountant and financial advisor. Trustees will be much better off if they understand the basics of their responsibilities and the professionals they can rely upon before the time comes to actually assume their trustee responsibilities
The legal costs for wills and trusts range. It will depend on the lawyer and the complexity of your situation. My suggestion is that you be prepared to spend $1,500 to $3,000 for the will, trust, and powers of attorney (a discussion for another day). If your situation is more complex, the costs can be greater. But don’t fool yourself into thinking you should pick a lawyer simply and solely based on price, otherwise you risk getting what you pay for. Find a lawyer with the experience you need.
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