History of the Henson Trust

Found this information on the internet and has a special interest to me as we have just completed this process through our lawyer for the Grandkids.


History of the Henson Trust

The Henson trust had its origins in the city of Guelph, Ontario. During the early 1980's, a gentleman by the name of Leonard Henson lived in the Guelph area and he had a daughter named Audrey. Audrey was a person with a developmental disability and she lived in a group home managed by the Guelph Association for Community Living.

Leonard knew that if he left his estate directly to his daughter, it would exceed the allowable asset limits as set out by the Family Benefits Allowance (now called the Ontario Disability Support Program).

He realized that having assets in the hands of his daughter directly would not be to her advantage and that her benefits would be terminated until the assets were "spent down" to a level below the threshold amount. In addition, Leonard's wife had pre-deceased him and he had no other family.

Therefore, Leonard went about to find a way to leave his estate to his daughter without interfering with her entitlement to government supports. He conferred with a number of legal people and advocacy organizations and even investigated what was going on in other jurisdictions within and outside of Canada.

Eventually, he discovered a technique that would allow Audrey to retain her government benefits while at the same time allowing her to receive quality of life enhancements from his estate.

That technique was the use of the Absolute Discretionary Trust to be created in his Will as a Testamentary Trust.

Leonard updated his Will with his lawyer. Unfortunately, he then died. At that point, the Will required the creation of an Absolute Discretionary Trust which appointed the Guelph Association for Community Living as Trustee and his daughter Audrey as beneficiary of the trust.

Once Audrey died, his Will instructed that the remaining funds in the Trust were to be passed on to the Guelph Association for Community Living.

The Ministry of Community, Family and Children's Services, the ministry which controls the FBA (ODSP), determined that Audrey had inherited the estate of her father and since it was in excess of the allowable amount of assets, they terminated her benefits.

The Guelph Association for Community Living challenged this decision and to make a long story short, the Ministry took the trust and the Trustee to court. The first court found that the funds contained in Audrey's trust account did not meet the FBA (ODSP) definition of assets and therefore, it ruled in favor of the Trustees.

The Ministry was not at all impressed with this decision and so they launched an appeal. The appeals ultimately reached the Supreme Court of Ontario and in September of 1989, the appeal was dismissed.

The Government lost and what that decision did for families with a son or daughter with a disability was to provide us with a vehicle in which we can place assets for our children without disqualifying them from receiving the ODSP payments to which they would otherwise be entitled.

In Canada, anyone with a disability may be entitled to support payments from the government. For example in the province of Ontario, the Ontario Disability Support Payments (ODSPs) is the provincial sponsored program set-up to provide financial support to assist those with physical and/or mental disabilities that have limited prospects of finding gainful employment do to their disability.

Although ODSP is a well-intentioned program, and a necessity for a society that perceives itself as just and socially responsible, ODSP has inherent flaws.

What are the flaws?
Government provided support payments at first glance would appear to offer an obvious financial remedy, helping to alleviate these hardships and the predicament that parents of disabled children find themselves in.

However, the law in Ontario like other provinces states that a person with disabilities must be deemed to be living in poverty in order to qualify for support payments.

The criteria that match the definition of what qualifies as living in poverty in Ontario have an extremely low benchmark. Liquid assets over $5,000 will effectively disqualify an otherwise justified recipient from receiving ODSP benefit payments.

The rule in effect requires the liquidation of all assets of disabled individuals if they are to be awarded any ODSP benefit payments. In short:
“Come back and see us when you have burned through your inheritance.”

Necessity is the mother of all inventions, is it not?

In the late 1980s, a very loving and forward thinking father in Guelph, Ontario named Leonard Henson approached his lawyer, George Goetz, to create a legal solution that would transfer enough of his estate to his disabled daughter, Audrey, that she would be able to be cared for throughout her life and after his death.

The salient issue was that if the assets were transferred directly to Audrey, she would be immediately rendered sufficiently financial well off that she no longer qualified for assistance from the Ontario Social Services Ministry.

After some thought, Goetz creatively drafted a Will for Henson that relied upon an “absolute discretionary trust” to transfer income to Audrey.

Ingeniously, set within the terms of the trust she would not technically own the assets. Though the Social Services Ministry objected vigorously, by 1989 the Ontario Court of Appeal approved this solution crafted by both Henson and Goetz, to the great benefit of the disabled and their parents and guardians nationwide.0

The modern era of the Henson Trust commenced.

Funding Method

The most effective method for setting-up and properly funding a Henson Trust is to fund the Trust through the proceeds of a life insurance policy that insures the life of the disabled person’s parent or guardian.

The reality today is that many parents with children with special needs do not feel they will have the financial where withal to provide for their disabled children’s financial needs after they have died.

Hence, the purchasing of life insurance by most parents and guardians on their own lives presents the most efficient and practical mechanism upon their deaths to fund Henson Trusts.

Other Considerations
Several aspects of the Henson Trust should be explored thoroughly by the parent or guardian of a disabled child. The most important consideration before setting-up this form of trust is to determine who will be appointed the Trustee/s. This decision should not be taken lightly.

The Trustee/s should be a person or entity that the parent or guardian can put their ultimate trust in. Parents or guardians must believe that their appointed Trustee/s to the Henson Trust will always do what is in the best interest of the disabled child.

Another major consideration when appointing a trustee/s is their ability to make wise investment choices while managing trust assets. In many cases where the trustee/s does not have the sufficient skills to manage the investments within the trust they will have had an investment manager appointed to manage the funds within the trust.

If you or your clients are seriously considering creating a Henson Trust it is of the utmost importance to consult first with a qualified Certified Financial Planner and an Estate Lawyer who are experienced with all the nuisances of setting-up, managing and winding-up Henson Trusts.