People with disabilities may have money of their own that they received through an inheritance. The usual test for participation in benefit programs checks whether the recipient has assets in their name. Usually, an inheritance would be something in their name, preventing them from receiving government benefits. Fortunately, in many cases, working with an experienced Henson trust lawyer can allow disabled people to maintain benefit eligibility without having to spend down their assets.
Henson Trusts Allow Disabled People with an Inheritance to Receive Government Benefits
Henson Trusts can preserve benefit eligibility for disabled people who have inherited assets. They operate by moving control of trust assets to a trustee in a way that makes the assets not counted towards limits for benefit eligibility.
The main benefit of a Henson Trust is the obvious one; it helps disabled people qualify for government benefits without having to spend their inheritance first. Usually, they are not able to hold more than $5,000 in assets. Without legal ownership of their inheritance, they are under the legal limit if they own little to nothing else.
This type of trust takes its name from Leonard Henson, a man who had set up a trust for his daughter who was disabled. She was receiving government benefits for her disability. The government tried to take her benefits away from her, claiming that she had too much money to qualify. In 1987, an Ontario court ruled that the trust meant that she did not have the assets to disqualify her from benefits. In 2019, the Canadian Supreme Court recognized Henson Trusts and ruled that assets held in them do not legally belong to the beneficiary.
Henson Trusts Have Strict Requirements About the Disabled Person’s Rights in the Asset
The reason why Henson Trusts allow disabled people to maintain benefit eligibility is that the beneficiary has no vested interest in the assets. One of the main indicators of ownership in assets is the ability to make decisions about them. In addition, being able to receive an asset upon demand from the trustee is also a sign of ownership.
The Henson Trust Lawyer in Ottawa will structure a trust arrangement in a way that removes the beneficiary’s vested interest. The money will be moved into a trust, and a trustee will be appointed. This trustee has absolute discretion over the assets in the trust, meaning that they can make decisions about investments and how to manage the money. Of course, the trustee must act in the interests of the trust, but they are the one who will legally control the assets. In turn, the trustee can provide the beneficiary with income from the assets, although the income must still remain below the limits for government benefits.
Some Required Elements of a Henson Trust
Based on Canadian court rulings, here are some necessary elements of Henson Trusts that a Henson trust lawyer should recommend:
The beneficiary has no legal right to assets but only a "mere hope" that they would receive the assets from the trust at some point in the future.
There must be an accounting for how the property will be distributed on the death of the beneficiary.
There must be an accounting for how trust income will be paid out after the accumulation period ends.
If all the legal requirements of a Henson Trust are met, it does not matter how large the trust is. As far as the government is concerned, the disabled person’s assets will always be the same. The assets would not be considered as those that belong to the beneficiary no matter what. When it comes to property, it is all about legal rights in it as opposed to how much is at issue. No legal rights mean no assets.
An Ottawa Henson Trusts Attorney Can Help
You must take great care in establishing a Henson Trust. If you stray from the legal requirements even in the slightest, you will jeopardize the disabled person’s ability to receive government benefits. Fortunately, an experienced Henson Trust attorney can ensure that any trust you create is in compliance with the law and preserves the beneficiary’s eligibility for government benefits.