Will ODSP count the money in a Henson Trust as income or assets?

No. As long as the trust gives the trustee absolute discretion and the beneficiary cannot demand payments, ODSP does not treat the trust’s assets as belonging to the beneficiary. However, certain payments from the trust might still count as income, depending on how they’re used.

How much can a Henson Trust spend on the beneficiary each year?

There’s no strict dollar limit, but trustees must follow ODSP guidelines. Small gifts or personal expenses are usually fine, while large cash payments might reduce ODSP benefits if reported as income.

Can a Henson Trust own a home for the beneficiary?

Yes. The trustee can buy or maintain a home for the person receiving ODSP. As long as the home is the beneficiary’s principal residence, ODSP will not treat it as a disqualifying asset.

Who should act as trustee?

Choose someone reliable, organized, and familiar with financial management. Many families appoint two or more trustees — for example, a family member plus a professional — to balance personal insight with legal expertise.

Can a Henson Trust be created while I’m still alive?

Yes. You can create one during your lifetime (an “inter vivos trust”) or include it in your Will so it begins after you pass away. Your lawyer can help you decide which option fits your financial and family situation.

What happens to the money when the beneficiary dies?

The trust ends, and the remaining funds go to the people or charities you name in your Will or trust document. This is known as a residual or gift-over clause.

Why should I hire a Will lawyer to set up a Henson Trust?

Because a single error in the trust’s wording could cost your loved one their ODSP benefits. A qualified Will lawyer ensures the trust meets all legal requirements, complies with ODSP regulations, and aligns with your broader estate plan.

How a Henson Trust Protects ODSP Benefits in Ontario

Introduction

If you have a loved one with a disability, you’ve probably wondered how to provide for their future without jeopardizing their government benefits. In Ontario, the Ontario Disability Support Program (ODSP) offers essential income and health support — but it also comes with strict financial limits.

Leaving money or property directly to someone receiving ODSP can unintentionally cause them to lose those benefits. The solution many Ontario families use is a Henson Trust — a powerful estate planning tool that protects both your loved one’s inheritance and their ODSP eligibility.

This article explains, in plain language, how a Henson Trust works, how it protects ODSP benefits, and why working with an experienced Will lawyer in Ontario is essential to get it right.

What Is a Henson Trust?

A Henson Trust is a special kind of discretionary trust created to benefit a person with a disability. It’s named after a landmark Ontario court case that established the rule that assets in a properly structured Henson Trust are not counted when ODSP determines a person’s eligibility for benefits.

Here’s how it works:

· The trust holds assets — such as cash, investments, or insurance proceeds — for the benefit of a person with a disability.

· The trustee (a person or institution you choose) has absolute discretion over when and how the money is used.

· The beneficiary (your loved one) cannot demand payments from the trust.

Because the beneficiary doesn’t legally control the money, ODSP treats the trust’s assets as belonging to someone else — which means the person can keep receiving their benefits while the trust helps pay for their extra needs.

How a Henson Trust Protects ODSP Benefits

To qualify for ODSP, a person generally cannot have more than a small amount of money or assets in their name. If they inherit property, savings, or life insurance directly, those funds could immediately make them ineligible for benefits.

A Henson Trust solves this by separating ownership and control:

The trustee owns and manages the trust assets.
The beneficiary benefits from the trust but has no enforceable right to the funds.

Because the beneficiary has no direct access, ODSP cannot count the trust as their asset. The trustee can then use the funds to improve the person’s quality of life — for example, paying for therapies, travel, education, or home accessibility — all without reducing their ODSP payments.

What Can a Henson Trust Pay For?

A Henson Trust can cover a wide range of expenses that enhance quality of life, such as:

· Disability-related items or medical equipment

· Educational or training costs

· Vacations and recreational activities

· Home improvements or mobility renovations

· Clothing, special diets, or personal care services

· Internet, phone, or entertainment subscriptions

While ODSP provides for basic needs, a Henson Trust ensures your loved one can enjoy comfort, dignity, and independence throughout their lifetime.

How to Set Up a Henson Trust in a Will – Step by Step

Creating a Henson Trust requires careful legal drafting. Here’s a step-by-step overview:

1. Consult a Will & Estate Lawyer: Work with a lawyer experienced in Ontario disability and estate planning. The trust wording must meet strict legal and ODSP standards.

2. Decide How to Fund the Trust: The trust can be funded during your lifetime (inter vivos) or through your Will (testamentary trust). Many families choose to fund it through their Will so the trust begins upon their death.

3. Choose a Reliable Trustee: The trustee should be trustworthy, financially responsible, and familiar with disability issues. You may appoint a family member, close friend, or a professional trustee (such as a trust company or lawyer).

4. Define the Beneficiary’s Needs: Your lawyer can help you outline how funds may be used, while maintaining trustee discretion so ODSP rules aren’t violated.

5. Include a Gift-Over Clause: The trust should specify what happens to any remaining funds after the beneficiary passes away, such as distributing them to other family members or charities.

6. Keep Records and Review Regularly: Trustees should keep detailed records of all transactions and review the trust regularly to ensure it continues to comply with current laws and ODSP policies.

Advantages of a Henson Trust

Preserves ODSP eligibility: Assets in the trust aren’t counted as the beneficiary’s property.
Provides lifelong financial support: The trust can last for the beneficiary’s lifetime.
Offers flexibility: Trustees can adapt spending to the beneficiary’s changing needs.
Protects from creditors: Since the beneficiary doesn’t own the assets, they’re shielded from legal claims.
Ensures peace of mind: Families know their loved one will always have supplemental support.

Potential Mistakes to Avoid

Giving the beneficiary direct access to the funds.
Naming a trustee who doesn’t understand ODSP rules.
Using vague trust wording that doesn’t make the trustee’s discretion absolute.
Failing to coordinate the trust with the rest of your estate plan (for example, life insurance or RRSPs).

These mistakes can undo the protection a Henson Trust provides — which is why professional legal advice is essential.

Why Work with a Will Lawyer in Ontario

Drafting a Henson Trust requires specialized knowledge of the intersection of estate law, trust law, disability benefits (ODSP), and tax law. General Will drafting may not cover all the nuances.
Mistakes in wording (e.g., not absolute discretionary, incorrect vesting clause, missing gift-over) can lead to unintended consequences like benefit loss, tax penalties, or litigation.
Your Will lawyer can work with you to choose the right trustee, structure the gift, and coordinate with your broader estate plan (Will, Power of Attorney, guardianship for disabled adult, etc.).
Ongoing guidance: The trustee may require advice on administration, interactions with ODSP, reporting, tax filings. Having the Will lawyer involved ensures continuity and oversight.
Local Ontario rules: Since each province has its own trust/estate rules and benefit program regimes, using a lawyer experienced in Ontario (and ideally in special-needs estate planning) is critical.

Conclusion

A Henson Trust allows Ontario families to care for a loved one with a disability — without risking their government support. It bridges compassion and financial strategy, ensuring that your loved one’s future is secure long after you’re gone.

If you’re considering this type of planning, it’s crucial to get the details right. Our experienced Will and Estate Planning lawyers in Ontario can help you structure a Henson Trust that protects your loved one’s ODSP benefits and gives your family peace of mind.

Call to Action

Contact our Will & Estate Planning team today to learn how a Henson Trust can fit into your estate plan and safeguard your loved one’s ODSP eligibility.

Questions about this topic? See our page on wills and powers of attorney in Mississauga, or call (289) 652-0529.