How a Henson Trust protects inheritance for family members with disabilities while preserving their eligibility for government support programs.
For families with a member who has a disability, leaving an inheritance directly to that person can inadvertently disqualify them from provincial disability benefits — particularly Ontario Disability Support Program (ODSP) and similar programs in other provinces. A Henson Trust is the solution: a carefully structured discretionary trust that lets a person with a disability benefit from an inheritance without losing their government support.
A Henson Trust is a fully discretionary trust — meaning the trustee has absolute discretion over when and how much to distribute to the beneficiary. Because the beneficiary has no legal entitlement to any specific amount, the trust assets are generally not considered to be "owned" by the beneficiary for the purposes of provincial disability benefit asset tests.
The trust is named after Leonard Henson, whose father set up such a trust for him. When ODSP challenged his eligibility, the Ontario Court of Appeal upheld the trust's validity in 1989, establishing the legal precedent.
Most provincial disability programs are means-tested: beneficiaries must have assets below a certain threshold to qualify. In Ontario, ODSP recipients can generally have no more than $40,000 in assets. If a person with a disability inherits $200,000 directly (through a will or beneficiary designation), they would typically lose ODSP benefits until they spent down the inheritance to below the limit.
A Henson Trust holds the assets for the beneficiary's benefit without those assets being counted as the beneficiary's property — preserving ODSP eligibility indefinitely, regardless of trust size.
Choosing the right trustee is the most important decision in setting up a Henson Trust. The trustee must:
Options include: a trusted family member (parent, sibling), a professional trustee (trust company), or a combination. Given the complexity and long time horizon, many families name a family member as primary trustee with a professional trust company as backup or co-trustee.
The Registered Disability Savings Plan (RDSP) is another tool for Canadians with disabilities. An RDSP can hold up to $200,000 in contributions and grows tax-sheltered. Importantly, RDSP assets are exempt from ODSP's asset test.
A Henson Trust and an RDSP can work together: the Henson Trust holds larger amounts and provides flexibility, while the RDSP provides tax-sheltered long-term savings. An RRSP rollover from a deceased parent's RRSP to a financially dependent disabled child's RDSP is also available under the Income Tax Act.
While Henson Trusts originated in Ontario and are well established there, similar structures are recognized across Canada:
| Province | Program | Henson Trust Recognition |
|---|---|---|
| Ontario | ODSP | Well established; widely used |
| British Columbia | PWD (Persons with Disabilities) | Recognized; discretionary trust assets generally excluded |
| Alberta | AISH | Recognized |
| Manitoba | EIA Disability | Recognized |
| Other provinces | Various | Generally recognized; verify with local rules |
A Henson Trust can be either:
A Henson Trust is a trust for tax purposes and files an annual T3 return. Income retained in the trust is taxed at the top marginal rate. Distributions to the beneficiary are included in the beneficiary's income — but the beneficiary's income is generally low, so the effective tax rate on distributions is usually minimal or zero.
A Henson Trust that qualifies as a Qualified Disability Trust (QDT) pays tax at graduated rates rather than the top marginal rate — a significant advantage. A joint election between the trustee and the beneficiary is required each year.
Part of good estate planning is keeping your financial accounts simple. KOHO's no-fee account is easy to manage and easy to include in your estate plan. Use code 45ET55JSYA for a bonus.
Get KOHO Free — Use Code 45ET55JSYAWhen properly structured as a fully discretionary trust, the assets in a Henson Trust are not counted against the ODSP asset limit. The beneficiary retains their ODSP eligibility regardless of the size of the trust.
The trust deed should specify who receives the remaining assets at the beneficiary's death (the "remainder beneficiaries"). This might be siblings, other family members, or a charity. Without clear remainder provisions, trust assets could become subject to legal disputes.
No. If the beneficiary is their own trustee with full discretion over distributions, regulators may treat the trust assets as being in the beneficiary's control — undermining the Henson Trust's purpose. The trustee must be an independent third party.
Related guides: Testamentary Trusts | Trusts in Estate Planning | Estate Planning Guide