Episode Summary

In this episode of Estates Made Simple, Gordon VanderLeek and Jenna Carvalho delve into the intricacies of Henson Trusts, focusing on their critical role in estate planning for disabled beneficiaries. They explore the origins of Henson Trusts, their evolution across provinces, and the specific considerations trustees must account for when managing them—especially in Alberta, where unique rules apply under the Assured Income for the Severely Handicapped (AISH) program.

This comprehensive discussion offers guidance for families looking to provide financial support for loved ones with long-term disabilities while safeguarding eligibility for government benefits.

Key Takeaways

1. What Is a Henson Trust?
   • Originated from a landmark Ontario case involving the Henson family.
   • Designed to allow disabled beneficiaries to retain eligibility for government support programs, even when benefiting from a trust.
2. Key Rules for Alberta (AISH):
   • Alberta recognizes Henson Trusts (sometimes referred to as "H Trusts") since 2018.
   • A properly constituted trust is an exempt asset under AISH, allowing beneficiaries to remain eligible for support programs.
3. Trustee Considerations:
   • Careful management of income distributions to avoid AISH clawbacks (current exemption: $300 plus 25% of the balance).
   • Balancing tax efficiency with AISH rules. Higher trust tax rates may be worth paying to protect benefits.
   • Capital distributions must be managed to ensure they comply with AISH asset limits.
4. Professional Advice Is Key:
   • Engage accountants and legal experts early to navigate rules and optimize trust management.
   • Trustees should coordinate with professionals to ensure compliance and avoid missed opportunities, like qualifying for the Qualified Disability Trust designation under CRA rules.
5. Advanced Planning Matters:
   • Setting up a well-structured Henson Trust in advance ensures trustees have the tools to effectively manage the trust upon the settlor’s passing.
   • Address interconnected considerations, such as guardianship, government benefits, and long-term financial planning.

Special Notes for Trustees:

• Trustees should consider direct purchases for exempt assets (e.g., housing, vehicles) instead of distributing funds to beneficiaries.
• Always review the terms for remainder beneficiaries to avoid conflicts or legal issues when distributing trust assets.

Additional Insights from the Episode:

• Gordon shares his passion for disability planning, stemming from personal experience, and highlights the importance of integrating legal, financial, and social program considerations for comprehensive planning.
• Jenna emphasizes the necessity of professional help to navigate the complexities of disability trusts and ensure the best outcomes for beneficiaries.

Hosts:
Jenna Carvalho
The smartest way to choose an executor.
Guardian Estate Company
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Gordon VanderLeek
Give your family a legacy of protection - Wills, Estates and Trusts.
VanderLeek Law
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