A Henson Trust allows you to leave an inheritance to a dependent with a disability in Newfoundland and Labrador without causing them to lose their provincial Income Support. Because the trustee has “absolute discretion” over the funds, the money is not legally considered the beneficiary’s asset. Expect to pay a law firm between $1,500 and $3,500 CAD to properly draft this trust.
As a parent or guardian of a child with a disability, your greatest worry is likely what will happen to them when you are no longer around. In Newfoundland and Labrador, individuals relying on provincial Income Support are subject to strict asset limits. If you leave a traditional inheritance-like a lump sum of money or a house-directly to a disabled dependent, those funds can immediately disqualify them from receiving their monthly government cheques and vital medical benefits.
To prevent this disastrous outcome, estate planning offers a powerful legal tool known as a “Henson Trust.” Named after a famous Canadian court case, this specific type of trust is widely recognised in Newfoundland and Labrador. It ensures your loved one’s inheritance is protected and used to enhance their quality of life, rather than replacing the government support they are legally entitled to. We will guide you through how this trust works, the steps to create one, and the associated costs as of May 2026. 📍
Step-by-Step Process for Setting Up a Henson Trust
A Henson Trust is typically built directly into your Last Will and Testament, meaning it only springs into action after you pass away. However, the wording must be incredibly precise to satisfy the provincial government’s criteria.
Step 1: Understand “Absolute Discretion”
The entire foundation of a Henson Trust rests on two words: “absolute discretion.” To protect the beneficiary’s provincial Income Support, the disabled person cannot have any legal right to demand the money. Instead, the trust document must state that the appointed trustee has total and absolute authority to decide if, when, and how much money the beneficiary receives. Because the beneficiary cannot force a payout, the government does not count the trust as their personal asset. 🔒
Step 2: Choose the Right Trustee
Selecting the trustee is the most critical decision you will make. This person will manage the funds and decide how to spend them for your dependent’s benefit. You need someone completely trustworthy, financially responsible, and deeply familiar with the beneficiary’s daily needs. Many parents in St. John’s and Conception Bay South choose a responsible sibling or a professional trust company. It is also wise to name a backup trustee in case your first choice is unable to serve.
Step 3: Draft the Trust with a Local Lawyer
You cannot use a DIY will kit to create a Henson Trust. You must hire an experienced estate planning lawyer in Newfoundland and Labrador. The lawyer will draft your will, explicitly incorporating the Henson Trust clauses. They will ensure the language aligns with the current policies of the provincial Department of Children, Seniors and Social Development, which administers Income Support. 📝
Step 4: Provide a Letter of Wishes
Because the trustee has absolute power, you should write a separate “Letter of Wishes.” While not legally binding, this document acts as an instruction manual for the trustee. You can detail exactly what you want the money used for-such as special medical equipment, a new computer, vacations, or extra therapy sessions-ensuring your child maintains a high quality of life.
How Much Does it Cost in Newfoundland and Labrador?
Creating a complex estate plan involves upfront legal fees, but this investment protects your dependent from losing tens of thousands of dollars in vital government support over their lifetime. 💲
| Service / Expense | Estimated Cost (CAD) | Details |
|---|---|---|
| Lawyer Drafting Fees | $1,500 – $3,500+ | The cost for a law firm to draft a comprehensive will containing a customized Henson Trust. |
| Trustee Compensation | Varies | Professional trust companies usually charge an annual management fee (e.g., 1% to 2% of the trust’s value). |
| Annual Tax Returns | $300 – $800 per year | Once the trust is active, the trustee must hire an accountant to file a T3 Trust Income Tax Return with the CRA. |
If you have a modest estate, you might also consider contributing to a Registered Disability Savings Plan (RDSP) while you are alive, as it is another excellent way to protect government benefits.
How Long Does the Process Take?
The process of planning and finalizing your will with a Henson Trust generally takes between 3 to 6 weeks. This includes your initial consultation with a lawyer, the drafting of the documents, your review of the draft, and the final signing appointment. Once the trust is written into your will, it lies dormant. It only becomes an active, functioning trust after you pass away and your estate goes through the probate process at the Supreme Court. ⏱️
Frequently Asked Questions (FAQ)
Can the government audit a Henson Trust?
Yes. The provincial government has the right to review the terms of the trust to ensure it truly gives absolute discretion to the trustee. If the trust is drafted incorrectly and gives the beneficiary the right to claim the money, Income Support benefits could be cut off immediately.
What happens to the leftover money when the dependent dies?
When you draft the Henson Trust, you must also specify “gift-over” beneficiaries. This means you decide who gets whatever money is left in the trust when the disabled dependent eventually passes away. Common choices include other siblings, grandchildren, or local charities in Newfoundland and Labrador.
Is a Henson Trust better than an RDSP?
They are different tools that work best together. An RDSP (Registered Disability Savings Plan) offers fantastic government matching grants while the person is alive, but it has strict contribution limits. A Henson Trust has no limit on the amount of money or property it can hold, making it ideal for large inheritances.
Does the beneficiary have to pay taxes on the trust money?
A trust is considered a separate taxpayer by the CRA. The trust itself pays taxes on any income or interest it generates. However, through complex tax planning (such as using preferred beneficiary elections), a good accountant can often minimize the tax burden for the disabled dependent.
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