Henson Trusts – What Are They and Why Are They Used?

One of the ways an individual may qualify for income support under The Ontario Disability Support Program Act[1] is to qualify under the definition of a “person with a disability.”  Generally, to qualify as a person with a disability, the individual must have a substantial physical or mental impairment that is expected to last at least 12 months and substantially limits that individual’s activities of daily living in at least one of the following three areas:


  1. Personal care;


  1. Activities in the community;


  1. Activities in the workplace.


Once a person has qualified as a person with a disability, certain financial tests must be met. If a prospective recipient or recipient of ODSP has assets (more than $40,000 with some exceptions)[2] or receives income over a prescribed limit, they will cease to be eligible to receive ODSP payments


Certain assets and funds are excluded from the asset limits and the accumulation of income in the funds is exempt from inclusion in the disabled’s persons income.  One of the most important of these funds is what is referred to as a “Henson trust.”  Henson trusts are used to provide extra comforts and income for the disabled person without jeopardizing government benefits.


A Henson trust established for a disabled beneficiary does not result in the loss of government benefits because the beneficiary has no vested right to receive income or capital from the trust.


Henson trusts have the following elements:


  • the trustee(s) must have absolute discretion;


  • the assets of the trust do not vest in the beneficiary; and


  • that there is a gift-over following the death of the beneficiary.


There is no limit on the value of capital that can be put into a Henson trust, however, distributions from the Henson trust are subject to the income limits imposed by The Ontario Disability Support Program Act.  It’s possible for the Henson trust to provide a steady income for the beneficiary, however, the income must remain low in order to not jeopardize the ODSP payments.


[1] S.O. 1997, c.25, Sch, B

[2] If the disabled person has a spouse, the disabled person is allowed a further $10,000 in assets (for a total of $50,000).