July 25, 2018
By Paul Jasiura
Estate planning provides you with the opportunity to ensure your loved ones are taken care of in the long term. However, when a loved one is living with a disability, and is receiving income support from the Ontario Disability Support Program (ODSP), proper estate planning is even more essential to ensure that inheritance or gifts to that individual do not impact their ODSP payments.
For an individual living with a physical or mental disability in Ontario, ODSP provides limited income support, as well as some health benefits and disability-related supports. To qualify for ODSP however, an individual must meet a threshold for financial need. The Ontario government determines this threshold with three tests: an assets test, a needs test, and an income test. Currently, an ODSP recipient cannot own non-exempt liquid assets exceeding $40,000.
There are number of things that are exempt from a recipient’s liquid assets, including:
- A house/property owned by the recipient that serves as their primary residence;
- A property necessary for the health/well-being of the recipient;
- A motor vehicle;
- A prepaid funeral;
- A Registered Education Savings Plan;
- Funds held in a Registered Disability Savings Plan; and
- Effective September 1, 2018: funds held in a registered retirement savings plan, and funds held in a TFSA.
If you want to leave money to a loved one receiving ODSP, placing that money in a trust ensures that your loved one’s assets and income amounts are not impacted. Typically, trusts established for a person with a disability have a cap of $100,000 before they are counted as an asset in ODSP calculations. Additionally, in order for these trusts to be excluded from a recipient’s liquid assets, the monies from a trust must be used for a limited number of purposes. However, a “Henson Trust” is not subjected to caps or use limitations.
A Henson Trust (named after the Ontario Court of Appeal case, The Minister of Community and Social Services v Henson,  OJ No 2093) is an “absolute discretion” trust where the trustee has full discretion regarding how, when and how much of the trust’s income or capital will be paid to the beneficiary. Because the beneficiary cannot demand payments from the trust, they have no control over the trust, meaning that a Henson Trust would not be considered as part of their liquid assets. However, because of the degree of control that a trustee has over the trust, it is important to pick someone reliable and who will act in the best interests of your loved one, to be the trustee of a Henson Trust.
One of the benefits of a Henson Trust is that there is no restriction on what the trust’s monies can be used for, as long as it is for the benefit of the disabled individual. While a Henson Trust does not have a monetary cap (which makes it a great option if the desired amount for your loved one exceeds $100,000), the trust must still follow the regulations of the Ontario Disability Support Program Act, 1997.
In 2017, the Ontario government made several changes to ODSP through several amendments to Ontario Regulation 222/98 (the “Regulation”). As of September 1, 2017, ODSP rates increased by 2%, as well as the asset limits for liquid assets increasing from $5,000 to $40,000 for single individuals and from $7,500 to $50,000 for couples.
Another change impacting Henson Trusts that came into effect on September 1, 2017 was the amendment increasing the exemption for gifts from $6000 to $10,000 every 12 months. With this increase, a trustee would be able to distribute more money to a beneficiary in a rolling 12-month period.
Because a Henson Trust can be established during your life time, or can be established in a will to care for your loved one after you are gone, this form of trust is something to consider in your estate planning. A carefully planned Henson Trust is a helpful tool to ensure that a family member’s financial needs will be taken care of in the long term, while enabling that individual to continue having access to their ODSP.