Should life insurance proceeds for a disabled beneficiary be paid into a trust instead of directly to them?

For a beneficiary receiving means-tested benefits like ODSP, this is generally worth serious consideration, because a lump-sum payout made directly to them can count as their personal asset and put them over the program's asset limits, even though the money was meant to help them. Directing the proceeds instead into a properly drafted discretionary trust, such as a Henson trust, where a trustee controls if and when payments are made, is the more common approach to avoid that outcome.

Making this work generally means naming the trust, not the individual, as the life insurance beneficiary, or directing in your will that insurance proceeds payable to your estate flow into the trust you've set up. The mechanics matter: simply hoping a family member will "look after" a direct payout informally doesn't give the same legal protection as a properly structured trust, and doesn't stop ODSP from treating a direct payout as the beneficiary's own asset.

Because life insurance often represents a significant, one-time sum, this is exactly the kind of decision worth reviewing with a lawyer before finalizing your beneficiary designations, rather than after a policy has already paid out.