Can a Henson Trust Own a Home in Ontario Without Hurting ODSP?

If you are the parent of an adult child with a disability who receives ODSP, you may worry about what happens to the family home or other money you leave behind. A gift or inheritance given outright can affect benefits. A Henson trust is a common tool for avoiding that problem.

This article explains how ODSP treats a Henson trust and a home, how a house can be held by the trust, and what land transfer tax and CRA trust filings can come up. The rules here are only a starting point, and you should have a lawyer and accountant review your actual plan.

What a Henson trust is and how ODSP treats it

A Henson trust is a true absolute discretionary trust. The trustee has absolute and sole discretion over payments, and the person with the disability cannot demand money from it. Under ODSP Directive 4.7, a trust of this kind is not considered an asset for ODSP purposes, so its capital can exceed $100,000.

That does not mean every payment is ignored. Payments used for approved purposes such as a principal residence are exempt income. Other withdrawals count as income in the month received, and trust activity must be reported annually.

The word absolute matters. A trust that gives the beneficiary any right to demand payments may not be treated this way. The directive also says Legal Services should be consulted when interpreting a specific trust or will. In practice, that means careful drafting and a check with ODSP are important.

Can the trust own the home?

A trust can generally hold real estate, with the trustee or trustees named as the registered owners for the trust. Two ODSP points help here. A house is an exempt asset, so an inheritance used to buy a principal residence is exempt. Payments from a discretionary trust used for a principal residence are exempt income.

Whether a home that the trust itself owns and that your child lives in is treated the same way depends on the trust wording and on how ODSP applies its directive to your facts. Confirm this with the lawyer and with ODSP before moving a home into the trust.

Title, a will and the estate

Many families use a Henson trust set up in a will, so it starts when the parent dies. Probate is normally needed when the deceased owned real property, and a Certificate of Appointment of Estate Trustee or Small Estate Certificate should be obtained before anyone signs an agreement of purchase and sale of the deceased's real property. The certificate gives the estate trustee authority to manage the estate assets and pay the estate debts.

A transfer from the estate's personal representative to a beneficiary, satisfying that beneficiary's interest in the estate, is not subject to land transfer tax and is reported as nil in paragraph 4 of the affidavit. Whether that applies when the home goes to a trustee for a trust depends on the facts and should be confirmed by a lawyer.

Estate administration tax for certificate applications on or after January 1, 2020 is $15 per $1,000 (or part thereof) of estate value above $50,000, and it is paid as a deposit when applying for the certificate. An Estate Information Return must be filed within 180 calendar days of receiving a certificate.

Moving a home into a trust while you are alive

Some parents consider transferring the home into a trust now. Land transfer tax is payable by the person who acquires land or a beneficial interest in land, when the transfer is registered. A gift of land is not exempt as such, but if no consideration passes in any form, no tax is payable. A mortgage remaining on the property is taxed as consideration regardless of the relationship between the parties, except for certain spousal transfers.

There are also income tax questions on moving a home into a trust, so it is worth raising them with an accountant. T3 returns are due no later than 90 days after the trust's tax year-end, and trusts other than bare trusts must file a T3 with Schedule 15 for 2025 year-ends unless specific conditions are met. Ask an accountant how the transfer and the trust's reporting would work for your family.

Only authorized Teraview account holders and their registered users can create and submit documents in Ontario's electronic land registration system, and authorized groups include lawyers, conveyancers and financial institutions. Who would register the transfer in your case is worth confirming with a lawyer.

What to do next

• Ask a lawyer to confirm whether your plan is a true absolute discretionary trust under ODSP Directive 4.7.
• Decide whether the trust will be set up in your will or now, and who will be trustee and successor trustee.
• Ask the lawyer how the home would be held and how ODSP will see it.
• Review your will for estate trustee appointments and the probate steps for any real property.
• Ask an accountant about income tax and annual T3 filing for the trust.
• Keep records of payments from the trust and report trust activity to ODSP annually.

ODSP rules and limits can change, so have the current directive checked at the time you plan.

Frequently asked questions