- A Registered Disability Savings Plan is a federal, tax-deferred savings vehicle — similar in concept to an RRSP, but designed specifically for a person eligible for the Disability Tax…
- A Henson trust is a different kind of tool.
- Neither tool is inherently "better" — they're built for different money and different moments.
If you're planning for a family member with a disability, you've probably heard both terms thrown around: RDSP and Henson trust. They get compared so often that families sometimes assume they're competing options — pick one or the other. They aren't. A Registered Disability Savings Plan and a Henson trust solve different problems, and most well-built plans for a person on disability-related income support end up using both, for different money, doing different jobs.
Confusing the two can leave real gaps. Money that should have gone into a tax-sheltered savings plan ends up sitting in a trust instead (or vice versa), and the family loses ground they didn't need to lose.
What an RDSP Actually Does
A Registered Disability Savings Plan is a federal, tax-deferred savings vehicle — similar in concept to an RRSP, but designed specifically for a person eligible for the Disability Tax Credit. Contributions grow tax-deferred inside the plan, and government contributions (grants and bonds) can be added over time based on the beneficiary's circumstances and family income.
An RDSP is opened by a "holder" for the benefit of a named beneficiary. Where the beneficiary is an adult with the legal capacity to manage their own affairs, they're typically the holder of their own plan. The rules for who else can act as holder — for a beneficiary who can't contract for themselves — are their own topic; the short version is that it usually requires either a properly made Power of Attorney for Property, a court-appointed guardian of property, or, in some circumstances, a federal accommodation for a qualifying family member. Verify the current rules before assuming any one route applies.
What a Henson Trust Actually Does
A Henson trust is a different kind of tool. It's a fully discretionary trust — commonly used in Ontario estate planning to leave property for a beneficiary who receives a means-tested government disability benefit, most often the Ontario Disability Support Program (ODSP). Because the trustee has complete discretion over whether, when, and how much to pay the beneficiary, the beneficiary has no fixed, vested entitlement to the trust property. That structural feature is what allows a properly drafted Henson trust to hold assets for someone's benefit without automatically counting as that person's own asset for means-tested benefit purposes.
A Henson trust doesn't have a contribution cap, isn't limited to registered-plan-eligible amounts, and can hold almost anything — cash, investments, life insurance proceeds, even real property — for as long as the will or trust deed provides.
RDSP vs. Henson Trust at a Glance
| RDSP | Henson Trust | |
|---|---|---|
| What it is | A registered, tax-deferred federal savings plan | A discretionary trust created by will or inter vivos deed |
| Who can benefit | A person eligible for the Disability Tax Credit | Anyone the settlor names, typically someone on a means-tested benefit |
| How money grows | Tax-deferred inside the plan; possible government grants and bonds | However the trust's investments are managed by the trustee |
| Who controls payouts | The plan holder, within the plan's own rules | The trustee, entirely at their discretion |
| Typical funding source | Family contributions, government grants/bonds | A bequest under a will, gift, or insurance proceeds |
| Best used for | Long-term, tax-sheltered savings during the beneficiary's lifetime | Holding an inheritance, gift, or lump sum without disqualifying the beneficiary from benefits |
Neither tool is inherently "better" — they're built for different money and different moments.
When Families Typically Need Both
Most families planning around a member's disability find they need an RDSP and a Henson trust, not one instead of the other, because the two tools handle different kinds of money:
- Ongoing family contributions during the beneficiary's lifetime are often best directed into the RDSP first, to take advantage of its tax-deferred growth.
- A parent's or grandparent's inheritance under a will is usually structured to flow into a Henson trust rather than directly to the beneficiary, precisely because a direct bequest can jeopardize ODSP eligibility.
- Life insurance proceeds intended to support the beneficiary after a parent's death are commonly directed to a Henson trust as well, rather than naming the beneficiary directly.
- A Henson trust can itself make ongoing contributions into the beneficiary's RDSP, provided the trust deed is drafted to permit it — this is a common way to keep both tools working together over time.
A simple way to think about it
If the money is meant to be the beneficiary's own long-term registered savings, an RDSP is usually the right home for it. If the money is a lump sum — an inheritance, a settlement, insurance proceeds — that needs to be protected from disqualifying the beneficiary from a means-tested benefit, a Henson trust is usually the right home for it.
Common Mistakes to Avoid
- [ ] Naming the beneficiary directly in a will "to keep things simple," without realizing it can trigger a benefits problem
- [ ] Assuming an RDSP alone replaces the need for any estate planning for a larger inheritance
- [ ] Drafting a Henson trust without confirming it actually gives the trustee full, unfettered discretion
- [ ] Forgetting to name a successor holder or backup trustee in case the first one can no longer act
- [ ] Treating "Henson trust" as a do-it-yourself template rather than a document that needs to be drafted correctly for it to hold up
Frequently asked questions
Can a Henson trust contribute to a beneficiary's RDSP?
Generally, yes — if the trust deed is drafted to permit the trustee to make contributions on the beneficiary's behalf. This is a common way for families to keep both tools working together, but it depends entirely on how the specific trust is worded.
Does having an RDSP mean I don't need a will that protects my child's inheritance?
No. An RDSP only holds what's been contributed to it during the beneficiary's lifetime, generally subject to contribution limits. A separate inheritance, gift, or insurance payout under your will is a different pool of money that needs its own protection, typically through a Henson trust.
Who should be the trustee of a Henson trust?
That depends on your family's circumstances — a trusted relative, a professional trustee, or a combination acting jointly are all used in practice. Because the trustee's discretion is the whole point of the structure, choosing someone reliable and willing to serve matters a great deal.
Is a Henson trust only useful for ODSP recipients?
It's most commonly used for ODSP because ODSP is a means-tested provincial benefit, but the same discretionary structure can be relevant wherever a beneficiary receives any income-tested support that a fixed inheritance could jeopardize.
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