The Henson Trust: How It Protects Disability Benefits in Canada

A widow in London, Ontario writes a will leaving her estate equally to her two adult children. One of them, in his early thirties, lives with a developmental disability and receives Ontario Disability Support Program (ODSP) benefits. Without changes to her will, his half of the estate — say, $180,000 — will land in his bank account and disqualify him from ODSP overnight, because ODSP cuts off at a $40,000 asset limit for a single recipient. He may spend the inheritance down to re-qualify, sometimes within a year, leaving nothing for the long-term housing, transportation, and support that benefits were paying for.

That outcome is what a Henson trust is designed to prevent. Properly drafted for the specific benefits program in question, it lets the same inheritance support the same person for life. Whether the beneficiary's interest is counted as an asset for eligibility purposes depends on the wording and structure of the particular benefits program, so "properly drafted" means drafted against that program — not against a general template. It is, in our experience, one of the single most important estate-planning conversations a Canadian family with a disabled member can have.

This guide explains how the trust works, where it is recognized, and what to ask a lawyer to draft. For the wider context, see our inter vivos vs testamentary trust article and the estate planning pillar.

Where the name comes from #

The structure is commonly associated with Director of Income Maintenance Branch of the Ministry of Community and Social Services v. Henson (1987), 26 O.A.C. 332 (Div. Ct.), aff'd (1989), 36 E.T.R. 192 (C.A.). Leonard Henson, a Guelph father in the early 1980s, asked his lawyer for a way to leave an inheritance to his daughter Audrey — who lived with a developmental disability — without losing her provincial benefits. The lawyer drafted a will trust giving the trustees absolute and unfettered discretion to pay (or not pay) anything from the trust to or for Audrey's benefit.

In Henson, the Ontario courts held that a beneficiary's interest in an absolutely discretionary trust was not an asset for the applicable benefit-eligibility analysis because the beneficiary had no enforceable right to compel distributions and no unilateral control over the trust property. Whether a Henson trust is treated as an asset remains dependent on the wording and structure of the applicable benefits regime.

That core structure — discretionary, unenforceable from the beneficiary's perspective — is what every modern Henson trust still uses.

The 2019 Supreme Court of Canada confirmation #

The Supreme Court of Canada subsequently considered the treatment of such trusts in S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4, [2019] 1 S.C.R. 99.^[1] A British Columbia housing corporation had argued that a Henson trust set up for Ms. A by her father's will should count as her asset when assessing her eligibility for a rental-assistance program. The Court held that the trust interest was not an asset under the wording of that application, that the housing corporation was not required to grant the assistance, but that it was required to consider the application rather than reject it solely because of the trust.

Read that carefully, because the common summary of it is wrong. What S.A. established is a nationally binding method of analysis — ask whether the beneficiary has an enforceable right to compel distributions and unilateral control over the trust property — and that method applies across Canada. It is not a blanket national exemption. S.A. concerned a contractual rental-assistance program, and the answer turned on that program's wording. Whether a Henson trust is treated as an asset remains dependent on the wording and structure of the applicable benefits regime.

The absolute-discretion requirement #

For a Henson trust to do its job, the drafting has to meet a strict structural test:

• The trustee must have absolute and unfettered discretion over whether, when, how much, and to whom (in or for the beneficiary's benefit) to distribute
• The beneficiary cannot have a vested or enforceable right to any income or capital
• The beneficiary cannot have the power to compel a distribution through demand or court application
• The beneficiary generally cannot have the power to remove the trustee or to control the trustee's decisions
• The trust ordinarily includes a gift-over clause specifying who receives the trust property if it is not exhausted in the beneficiary's lifetime (often the beneficiary's children, siblings, or a registered charity)

Any drafting that gives the beneficiary an enforceable right risks the trust being treated as their asset for benefits purposes. This is why a Henson trust ordinarily needs a lawyer with experience in disability planning, not a generic will package.

Provincial recognition and program-specific rules #

Most Canadian provinces recognise the absolute-discretion principle, but each disability benefits program defines "asset" and "income" slightly differently:

• Ontario (ODSP) — Henson trusts are well-established and excluded from the asset test under the Ontario Disability Support Program Act regulations.^[2] Trust payments made directly to third parties (rent, utilities, transportation) generally do not count as income; cash to the beneficiary may.
• British Columbia (PWD) — Henson trusts are recognised; PWD has detailed rules on what trust disbursements count as income, including a monthly disability-related exemption.
• Alberta (AISH) — Recognised in practice; AISH rules treat discretionary trust assets as exempt where the beneficiary has no entitlement. Income from the trust paid to the beneficiary can count against the income calculation depending on the type of expense.
• Saskatchewan, Manitoba, Nova Scotia, New Brunswick, PEI, Newfoundland and Labrador — Each accepts the principle with program-specific rules on disbursement treatment.

The cross-provincial summary is that absolute-discretion drafting is portable, but how distributions are characterized varies. Drafting and trust administration both need to be matched to the province the beneficiary actually lives in.

Henson trust + Qualified Disability Trust election #

A testamentary Henson trust can also elect Qualified Disability Trust (QDT) status under the Income Tax Act if the beneficiary qualifies for the disability tax credit.^[3] The election gives the trust access to graduated tax rates indefinitely — a significant tax saving compared to the top-marginal-rate default that applies to most post-2016 testamentary trusts.

The two structures complement each other:

• The Henson structure addresses provincial benefits eligibility — subject to the particular program's wording
• The QDT election preserves graduated tax rates federally and provincially

For the QDT election, the beneficiary must be eligible for the DTC each year, the trust must have only DTC-eligible beneficiaries (or be jointly elected with one), and the deceased must have been the source of the property contributed to the trust. The disability tax credit eligibility itself is a separate application to CRA.^[4]

How a family typically uses one #

The most common structure is a Henson trust set up by will:

1. The will leaves the beneficiary's share to a separate Henson trust within the estate, not to the beneficiary outright
2. The trustees (usually a sibling, a family friend, or a corporate trustee — sometimes a combination) hold the funds
3. The trust pays third parties for expenses that benefits do not cover (extra dental, recreation, vacation, technology, additional caregivers, modifications to housing) and avoids large cash distributions that would count as income
4. The trustees coordinate with the beneficiary's care team and substitute decision-maker
5. On the beneficiary's death, the gift-over clause directs the remainder

Many families combine the trust with a Registered Disability Savings Plan (RDSP) in the beneficiary's name, which has its own asset-test exemptions and government grant matching but operates differently from a Henson trust. The two tools are complementary, not alternative.

What to ask the lawyer #

A few practical points:

• Province match. The lawyer should know the specific benefits program the beneficiary uses. Ontario lawyers know ODSP; BC lawyers know PWD. If the beneficiary may move provinces, ask about portability.
• Trustee plan. Discuss who the trustee and successor trustees will be, and whether a corporate trustee is appropriate given the expected lifespan of the trust.
• Coordination with the will residue. The trust is typically a sub-trust of the estate; the residue clause needs to direct the right share into the trust without accidentally creating a vested right.
• Coordination with siblings. Where siblings are residual beneficiaries of the trust, the will should be drafted so they understand the role and the timeline.
• QDT planning. If the beneficiary qualifies for the DTC, the QDT election should be in the lawyer's plan from day one.

What we focus on at It's Simple Will #

It's Simple Will does not draft Henson trusts — they are bespoke work that needs a lawyer with disability-planning experience, not a DIY platform. What It's Simple Will does is help a family identify when one is needed, build the supporting will structure, and capture the executor and trustee information in the Life Discovery Kit. If your family has a member receiving means-tested provincial benefits, the right next step is a consultation with a disability-planning lawyer in your province — not a DIY will alone.

For wider context see the inter vivos vs testamentary trust article, the estate planning pillar, and the wills pillar. Start your foundation will at the It's Simple Will app.