- A gift or inheritance paid directly to someone on ODSP is generally income in the month received, with only a $10,000 allowance per 12 months.
- ODSP does not count a true absolute discretionary (Henson) trust as an asset, so its capital may exceed $100,000.
- Payments out of the trust are exempt for certain purposes, and otherwise only up to $10,000 in a 12-month period.
Many families want to leave money to a relative who receives Ontario Disability Support Program (ODSP) benefits, without putting those benefits at risk. Simply naming the relative to receive the money can have the opposite effect.
This article explains why direct gifts cause problems, how a discretionary trust works, how it compares with other options, and what a family should think about before setting one up.
Why a direct gift can cause problems
ODSP generally treats inherited money as income in the month it is received, and any amount left over the following month as an asset. The asset limits are $40,000 for a single person, $50,000 for a couple and $500 for each dependant other than a spouse.
Each person in the benefit unit can receive a total of up to $10,000 in a 12-month period from gifts, voluntary payments, trust and life insurance payouts and inheritances. Amounts above that generally count as income in the month received. A larger bequest paid straight to the person can therefore affect benefits.
How a Henson trust works
A Henson trust is an absolute discretionary trust. The family chooses a trustee, and the money is held by the trustee rather than given to the relative. ODSP does not count a true absolute discretionary trust as an asset, so its capital may exceed $100,000.
The key feature is control. The trustee has sole discretion over payments and no duty to pay for the beneficiary's living costs. ODSP's treatment applies to a true absolute discretionary trust, which is why the wording of the trust matters.
Not every trust qualifies. ODSP's description is of a true absolute discretionary trust, so the wording of the trust matters. A lawyer can confirm whether a particular document fits.
Comparing your options
There are three broad ways the money can reach a person on ODSP.
| Option | How ODSP treats it | Main limit |
|---|---|---|
| Paid directly | Income in the month received; leftover is an asset next month | $10,000 allowance in 12 months |
| Trust funded by inheritance or life insurance | Exempt asset | Up to $100,000, including cash surrender value of life policies |
| True absolute discretionary trust | Not counted as an asset | Capital may exceed $100,000 |
For the $100,000 trust, recipients may be given up to six months to set it up. Who should set up a trust, and how, depends on your situation, so it is worth confirming the details with a lawyer before you decide.
Payments out of the trust
What the trustee pays out can still affect benefits. Payments are exempt as income when used for:
- approved disability-related items or services
- disability-related education or training
- a principal residence
- an exempt vehicle
- first and last month's rent
Otherwise, payments are exempt only up to $10,000 in a 12-month period, and other withdrawals count as income in the month received. A trustee should plan payments with these categories in mind and keep clear records.
What a family should do next
If the money will come from life insurance, the way the beneficiary is named matters. An insured may name a beneficiary in the contract or by a declaration, and unless the designation is irrevocable the insured may change it at any time by a declaration. When a beneficiary is designated, the insurance money does not form part of the insured's estate. Naming the insured's estate instead sends the money through the estate.
- Decide how much you want to leave and compare it with the $10,000 allowance and the $100,000 trust cap.
- Choose a trustee who understands that payments are discretionary.
- Check that any life insurance designations match the trust plan.
- Ask a lawyer to draft the trust so it fits ODSP's description of a true absolute discretionary trust.
- Tell the relative on ODSP to report the inheritance they expect to receive.
- Give the trustee a list of payment categories that ODSP exempts.
ODSP rules and limits can change, so have them confirmed when you plan.
Frequently asked questions
Is there a dollar limit on a Henson trust?
ODSP does not count a true absolute discretionary trust as an asset, so its capital may exceed $100,000. The $100,000 cap applies to the other kind of trust funded from an inheritance or life insurance.
Can the trustee pay the person's rent?
Payments out of an ODSP trust are exempt as income when used for a principal residence or first and last month's rent. Other payments are exempt only up to $10,000 in a 12-month period.
Does the person on ODSP still have to report the inheritance?
Recipients must report inheritances they receive or expect to receive. How a trust is reported is best confirmed with ODSP and a lawyer.
Can the person on ODSP act as their own trustee?
A Henson trust depends on the trustee having sole discretion over payments, with no duty to pay for the beneficiary's living costs. A beneficiary who controls payments to themselves may not fit that description, so get legal advice on who should serve.
Sources
- Insurance Act, R.S.O. 1990, c. I.8 (e-Laws Word version) — Ontario e-Laws
- ODSP Income Support Directive 4.1 (updated March 10, 2026) — ontario.ca
- Ontario.ca – ODSP eligibility for income support — ontario.ca
- ODSP Income Support Directive 4.7 – Funds held in trust — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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