Because a Henson Trust is fully discretionary, the beneficiary has no vested legal right to demand the funds. As a result, Ontario family courts generally do not include the trust’s capital in the beneficiary’s Net Family Property for equalization, successfully shielding the asset during a divorce.
For families in Ontario dealing with disabilities, the Henson Trust is a vital estate planning tool. Named after a famous 1989 Ontario court decision, this specific type of trust is designed to hold inheritance money for a disabled person without disqualifying them from receiving Ontario Disability Support Program (ODSP) benefits. The magic of a Henson Trust lies in “absolute discretion”-the trustee has total control over whether the beneficiary receives a single cent.
However, when a beneficiary of a Henson Trust gets married and subsequently goes through a divorce, major legal questions arise. Does the ex-spouse get a share of the trust money? Can the trust be used to pay spousal support? Generally, because the disabled spouse does not legally own the capital in the trust, it cannot be divided as standard family property. Navigating this intersection of family law and estate law requires a highly specialized law firm to ensure ODSP benefits and trust capitals remain protected.
Step-by-Step Process in Ontario
If you or your spouse are the beneficiary of a Henson Trust during a separation, you must follow strict legal procedures to ensure the trust is characterized correctly on your financial statements.
Step 1: Secure and Review the Trust Deed
The very first step is to obtain a copy of the original trust document (often found within a parent’s Last Will and Testament). Your family lawyer must review the wording meticulously. To qualify for protection, the document must state that the trustee has “absolute and unfettered discretion” over all distributions. If the beneficiary has the power to demand money, it is not a true Henson Trust.
Step 2: Exclude the Capital from Net Family Property
When filling out your Form 13.1 Financial Statement for the Ontario Superior Court of Justice, the capital of a true Henson Trust is generally excluded from your Net Family Property (NFP). Because you cannot force the trustee to give you the money, you do not have a vested property interest in it. Therefore, your ex-spouse cannot demand an equalization payment based on the trust’s total value.
Step 3: Assess Historical Income Distributions
While the capital is protected from property division, the income generated is treated differently. If the trustee has a historical pattern of paying your rent, buying groceries, or giving you a monthly allowance, an Ontario judge may view this as an ongoing income stream. This income can be factored into calculations for spousal support or child support.
Step 4: Prevent Judicial Interference
Sometimes, an aggressive ex-spouse will try to name the trustee as a third party in the divorce lawsuit, asking the judge to force the trustee to release funds to pay for spousal support. Ontario courts are generally very reluctant to interfere with a trustee’s absolute discretion, provided the trust was legitimately established by a third party (like a parent) and not created by the spouse specifically to hide money.
Step 5: Draft a Protective Separation Agreement
The final step is negotiating a separation agreement that acknowledges the existence of the trust but explicitly waives the ex-spouse’s right to claim against it. This document must be drafted carefully to ensure it does not inadvertently trigger an ODSP clawback for the disabled spouse.
How Much Does it Cost in Ontario?
Defending a Henson Trust during a divorce involves niche legal expertise. Estimated costs include:
- Trust Review and Legal Opinion: Having an estate and family lawyer review the trust deed and provide a strategic opinion generally costs between $2,000 and $5,000 CAD.
- Standard Separation Agreement: Negotiating a resolution without going to court typically costs $3,500 to $7,500 CAD.
- Court Litigation: If the ex-spouse aggressively challenges the validity of the trust in court, litigation fees can easily escalate beyond $25,000 CAD.
How Long Does the Process Take?
If the ex-spouse’s lawyer understands trust law, reviewing the deed and agreeing to exclude the capital can take just 1 to 3 months. However, if there is a bitter dispute over whether historical trust payments should count as income for spousal support, resolving the matter through mediation or a court motion can take 6 to 12 months.
Henson Trust vs. Standard Trust in Family Law
| Beneficiary Control | Zero control. The trustee has absolute and unfettered discretion. | The beneficiary has a vested right to demand the capital at a certain age or time. |
| Property Equalization | Capital is generally excluded from Net Family Property in Ontario. | Capital is generally included and subject to 50/50 division with the ex-spouse. |
| ODSP Impact | Fully protects the beneficiary’s eligibility for Ontario Disability Support Program. | Will likely disqualify the beneficiary from receiving ODSP. |
Frequently Asked Questions (FAQ)
Can child support be taken from a Henson Trust?
Child support is the right of the child and is fiercely protected in Ontario. While a judge cannot easily force a trustee to dissolve the capital, if the trustee regularly distributes income to the disabled parent, the court will likely impute that income for the purposes of calculating mandatory child support.
What if I created the Henson Trust myself during the marriage?
A true Henson Trust is usually created by a third party (like a parent’s will). If you took marital savings and placed them into a discretionary trust for yourself during the marriage to hide money from your spouse, an Ontario judge will likely pierce the trust and order the assets equalized.
Does my ex-spouse get to see the trust documents?
Yes. Under the strict financial disclosure rules in Ontario family law, you must provide a copy of the trust deed to your ex-spouse’s lawyer. Attempting to hide the existence of the trust will severely damage your credibility with the court.
Can spousal support payments affect my ODSP?
Yes. If you are receiving ODSP and are awarded spousal support from your ex-spouse, the Ontario government generally deducts spousal support dollar-for-dollar from your ODSP cheque. You must coordinate with a lawyer to ensure your support is structured as efficiently as possible.
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