Most social assistance programs funded by the public purse have financial restrictions on eligibility. The Ontario Disability Support Program (ODSP) is no exception. To qualify for ODSP, the recipient must not have more than the prescribed assets. (For more information, read my blog “Too Much Money? ODSP’s Asset Restrictions,” posted on April 20, 2009.)

A Henson trust refers to a discretionary trust where the trustees have absolute discretion on the trust’s administration, while the beneficiaries under the trust cannot compel the trustee to pay out money. The name of the trust is derived from the Ontario Court of Appeal case Ontario v. Henson.*

In Henson, the settler of the trust mandated that the capital and income of the trust was not to vest in the beneficiary, and the only interest the beneficiary could have was the payments actually made. (In other words, there’s nothing legally the beneficiary can say or do to get more money than what’s actually paid by the trustees.) Therefore, the court ruled that the beneficiary did not have a beneficial interest in the trust.

Henson was considered a milestone in trust law in Ontario. It opened a door through which the asset restrictions of many state-funded welfare programs may be circumvented legally. The method of utilizing a discretionary trust to secure state benefits soon became widespread.

At the same time, creating a Henson trust means that the beneficiary is entirely at the trustees’ mercy. Hence, some lawyers caution their clients only to consider a Henson trust as the very last resort.

It’s important to remember not all discretionary trusts are Henson trusts. For example, 10 years after Henson in Ozad v. Ontario,^ the court held that whether a trust should be considered a Henson trust  would rest on the chosen wording.

A trust will become a “liquid asset” of its beneficiary if the words creating the fund oblige the trustee to consider the needs of the beneficiary, unless there is a provision in the document removing the fund in whole or in part from the reach of the beneficiary.

For example, in Keddy v. Director, Ontario Disability Support Program,# the court has made it clear that an unsheltered trust will be included as assets. Accordingly, of the accumulated assets exceed the prescribed level, the applicant will be disqualified from the ODSP.

*[1989] 36 E.T.R. 192; aff’g [1988] O.J. No. 1121

^[1998] O.J. No. 6498

#[2002] CanLII 17592

Note: Please keep in mind that this article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.

Let PSWLaw fight for your ODSP appeal before the Social Benefits Tribunal.