Henson Trusts: A Guide for Special Needs Planning

When it comes to planning for the future of a loved one with special needs, many families consider setting up a Henson trust. This type of trust is specifically designed to provide financial support for a person with a disability, without affecting their eligibility for government support programs like the Ontario Disability Support Program (ODSP).

What is a Henson Trust?

A Henson Trust is created to hold funds for the benefit of a person with a disability, and the funds from the trust can be used to supplement government support programs like ODSP. This type of trust is often referred to as a “discretionary trust” because the trustee has discretion over how the funds from the trust are used.

Considerations For Henson Trust Beneficiaries

One of the main benefits of a Henson trust is that it allows a person with a disability to receive funds from the trust without affecting their eligibility for government support programs like ODSP. However, it’s important to note that the funds received from the trust are considered taxable income for the beneficiary. The beneficiary will need to report this income on their income tax return and pay taxes on the funds received from the trust.

Considerations For Henson Trust Trustees

As the trustee of a Henson trust, it’s important to understand your obligations when it comes to income tax. You are responsible for managing the trust and ensuring that all required tax forms and returns are filed on behalf of the trust. You will also need to file a T3 Trust Income Tax and Information Return each year to report the income earned by the trust. It’s recommended that you consult with a tax professional to ensure that you are meeting all of your tax obligations as the trustee of a Henson trust.

Planning Tool for Family Members

For many family members, setting up a Henson trust is a critical component of their estate planning. It provides a way to ensure that a son or daughter with a disability is able to receive support for their future needs, without affecting their eligibility for government support programs. 

A Henson trust can provide peace of mind for families, knowing that their disabled beneficiary will have access to the funds from the trust when they need them.

In addition to income tax considerations, it’s also important for families to consider the long-term management of the trust and the trustee support required to manage the trust effectively. This may include seeking professional advice from a financial advisor or tax professional, as well as ensuring that the trust is structured in a way that meets the specific needs of the disabled beneficiary.

In conclusion 

A Henson trust can be a valuable planning tool for families with a member who has a disability. However, it’s important to understand the potential implications for both the beneficiary and the trustee. By working with a professional and seeking the right support and guidance, families can ensure that the Henson trust provides the long-term support their loved one with a disability needs.