A Henson Trust is an “absolute discretionary trust” that protects a disabled beneficiary’s eligibility for provincial support programmes like ODSP in Ontario or PWD in British Columbia. Because the beneficiary cannot demand the money, the government does not count it as their asset. Drafting this trust through a Canadian law firm generally costs between $1,500 and $3,500 CAD.
Leaving an inheritance or a financial gift to a loved one with a disability can be incredibly stressful for Canadian families. If you simply leave a lump sum to a disabled relative, it could instantly disqualify them from vital provincial disability benefits. Provincial support programmes strictly limit how much money a person can have in their bank account. To solve this problem, estate planners across Canada rely on a powerful legal tool called the Henson Trust.
Originating from a landmark Ontario court case, the Henson Trust has become the gold standard for special needs planning across most of the country. By giving the trustee complete control over the funds, the money legally belongs to the trust, not the beneficiary. Navigating this process requires precision. If the trust agreement contains a single error regarding the trustee’s power, the Canada Revenue Agency (CRA) and provincial ministries could invalidate it. Consulting a specialized estate lawyer from our directory is always recommended.
Step-by-Step Process in Canada
Setting up a Henson Trust requires careful coordination of federal tax laws and provincial disability regulations. The rules vary slightly depending on whether you live in Halifax, Toronto, or Calgary. Note that in Quebec, trusts operate under the Civil Code (as a fiducie) and require different legal phrasing. Here are the general steps for the rest of Canada.
Step 1: Choose the Type of Trust
You must decide when the trust will take effect. 📝 A Testamentary Henson Trust is embedded inside your Last Will and Testament and only comes into existence after you pass away. This is the most common choice for parents providing for a disabled child. Alternatively, an Inter Vivos Henson Trust (a living trust) is created while you are still alive, allowing grandparents or other family members to contribute money to it immediately.
Step 2: Select the Right Trustee
The success of a Henson Trust rests entirely on the shoulders of the trustee. Because it is an “absolute discretionary” trust, the trustee has the final say on whether to give the beneficiary any money, how much to give, and when to give it. You need someone trustworthy, financially responsible, and deeply familiar with the beneficiary’s daily needs. Many families choose to appoint a sibling alongside a professional corporate trustee to ensure long-term stability.
Step 3: Draft the Trust Deed with a Lawyer
This is where precision is non-negotiable. The legal document must explicitly state that the beneficiary has no legal right to demand the funds. If the wording accidentally creates a “vested interest” (meaning the beneficiary is guaranteed a certain amount each month), provincial authorities will classify the trust as an asset. Your lawyer will ensure the language perfectly aligns with the requirements of your specific province.
Step 4: Notify Provincial Authorities
Once the trust is active and funded, it must usually be disclosed to the provincial disability support programme. 📋 For example, if the beneficiary is on the Ontario Disability Support Program (ODSP) or Alberta’s Assured Income for the Severely Handicapped (AISH), your lawyer or trustee will provide them with a copy of the trust deed to prove it is a fully discretionary Henson Trust and therefore exempt from asset limits.
| Province | Disability Programme | Henson Trust Recognition |
|---|---|---|
| Ontario | ODSP | Fully recognized. No limit on trust size. |
| British Columbia | PWD | Recognized as a fully discretionary trust. |
| Alberta | AISH | Recognized, but subject to specific AISH exemption rules. |
How Much Does it Cost in Canada?
Establishing a Henson Trust involves legal fees for drafting and ongoing fees for administration. All amounts are estimated in Canadian dollars (CAD) and reflect the economic landscape as of May 2026.
- Drafting a Testamentary Trust: $1,500 to $3,500 CAD (usually included as part of a comprehensive Will package).
- Drafting an Inter Vivos Trust: $2,500 to $5,000 CAD.
- Annual CRA T3 Tax Return: $500 to $1,500 CAD per year for a chartered accountant.
- Corporate Trustee Fees: If you use a trust company, they typically charge 1% to 5% of the trust’s total value annually.
How Long Does the Process Take?
⌛ Drafting the trust deed with a qualified Canadian law firm typically takes between 3 to 6 weeks from your initial consultation to the final signing. If it is a testamentary trust, the trust itself will not be activated until the administration of your estate, which can take several months after death. For a living (inter vivos) trust, the setup is immediate once the deed is signed and a bank account is opened.
Frequently Asked Questions (FAQ)
What if the trustee refuses to give the beneficiary any money?
Because it is an absolute discretionary trust, the trustee legally has the right to withhold funds. This is why choosing the right trustee is critical. You can write a non-binding “Letter of Wishes” to guide the trustee on how you want the money spent.
Can the beneficiary demand money to buy a house?
No. If the beneficiary has the power to demand money for any reason, the trust is no longer discretionary, and the provincial government will cut off their disability benefits. The trustee must make the purchase on their behalf.
Are Henson Trusts valid in Quebec?
Quebec uses the Civil Code rather than Common Law. While you can achieve a similar result using a fully discretionary fiducie, the legal mechanics are different. You must consult a Quebec notary or lawyer to draft it properly.
Does a Henson Trust pay income tax?
Yes. A trust is considered a separate taxpayer by the CRA. If the trust earns interest or investment income and keeps it within the trust, it is taxed at the highest marginal rate. Income paid out to the beneficiary can sometimes be taxed in the beneficiary’s lower tax bracket.
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