- A Henson trust is a discretionary trust, and in BC a discretionary trust is not treated as an asset for disability assistance if the person has no way of collapsing it and gaining control of the assets.
- A non-discretionary trust counts as an asset and is exempt only where the amount contributed does not exceed $200,000.
- The wording of the trust and the way it is run decide whether it protects benefits, so it is worth having a lawyer review it.
If a family member has a disability and receives BC disability assistance, leaving money to them directly can cause problems. Assets and income can affect eligibility, which is why families look at trusts.
A Henson trust is the name commonly given to a discretionary trust set up for a dependent person. This article explains the idea in plain words and how the BC rules treat trusts of this kind.
This article covers the law of British Columbia.
What a Henson trust is
In plain terms, a Henson trust is a trust where the trustee decides when and how much to pay to the person with the disability. The person does not have a fixed right to demand the money. That discretion is the feature that matters for benefits.
The trust holds the property, and the trustee manages it for the person's benefit. Whoever is chosen as trustee takes on real legal responsibilities, covered below.
How BC disability assistance treats trusts
The BC ministry looks at whether the person can reach the trust property. A discretionary trust is not treated as an asset if the client has no way of collapsing it and gaining control of the assets. A non-discretionary trust counts as an asset.
| Type of trust | How it is treated |
|---|---|
| Discretionary, with no way for the person to collapse it and take control | Not treated as an asset |
| Non-discretionary | Counts as an asset, and is exempt only where the amount contributed does not exceed $200,000 |
The ministry's published guidance is spread across several documents and can differ in detail, so confirm the current position before relying on any figure.
Registered Disability Savings Plans and timing
A Registered Disability Savings Plan (RDSP) is a separate tool. Assets held in an RDSP are exempt for BC disability assistance, and RDSP payments are exempt as income and assets.
Assets received for transfer into a trust or RDSP are temporarily exempt for up to three months, the first month being the month received. The ministry may extend this month by month if the delay is beyond the client's control and reasonable efforts are shown.
What the trustee has to do
- Invest as a prudent investor would, using the care, skill, diligence and judgment that a prudent investor would exercise.
- Not invest in a manner inconsistent with the trust.
- If investment authority is delegated to an agent, set the investment objectives and act prudently in choosing the agent and monitoring performance. Delegation is not allowed where the trust requires the trustee to act personally.
- Pass accounts as the law requires. Executors and testamentary trustees must obtain a court order passing their first accounts within 2 years of the grant or appointment, unless all beneficiaries approve the accounts in writing or the court directs otherwise.
- Be paid only what is allowed. A trustee may receive a fair and reasonable allowance not exceeding 5% of the gross aggregate value of the estate, but this does not apply where the trust instrument sets the allowance.
A trustee who acted honestly and reasonably and ought fairly to be excused may be relieved by the court from liability for a breach of trust.
What to do next
- Confirm with the ministry how the person's current benefits treat the trust and any RDSP.
- Have a lawyer review the trust wording, especially the trustee's discretion and whether the person could collapse the trust.
- Choose a trustee who can keep records and communicate with the person and the family.
- Ask an accountant about the tax reporting for the trust.
Frequently asked questions
Is a Henson trust the same as any discretionary trust?
The name is commonly used for a discretionary trust for a dependent person. What matters under the BC rules is whether the trust is discretionary and whether the person has any way of collapsing it and taking control.
Can a Henson trust be non-discretionary?
A non-discretionary trust counts as an asset. It is exempt only where the amount contributed does not exceed $200,000.
Does an RDSP affect disability assistance?
Assets held in an RDSP are exempt for BC disability assistance, and RDSP payments are exempt as income and assets.
Can the trustee hire someone to manage the investments?
Often yes, to the degree a prudent investor could under ordinary business practice, but the trustee must still set the objectives and monitor the agent. It is not allowed where the trust requires the trustee to act personally.
Sources
- Trustee Act, BC Laws — bclaws.gov.bc.ca
- gov.bc.ca – BCEA Policy and Procedure Manual: Trusts — www2.gov.bc.ca
- gov.bc.ca – Disability Assistance and Trusts booklet — www2.gov.bc.ca
- gov.bc.ca – BCEA Policy: Assets and Exemptions — www2.gov.bc.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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