Leaving an inheritance directly to a disabled sibling in Ontario can accidentally cancel their government ODSP benefits. Setting up a specialized Henson Trust within your Will protects their funding, with legal drafting fees usually ranging from $1,000 to $3,000 CAD.
Estate planning is not just for parents providing for their children. Many people in Ontario act as the primary caregiver or financial safety net for a dependent adult brother or sister. If your sibling relies on the Ontario Disability Support Program (ODSP), leaving them a standard cash inheritance can be a disastrous mistake.
Under ODSP rules, a recipient can only have a very small amount of assets in their own name. 📋 If they inherit a large sum of money or a house directly from your estate, their government cheques and critical medical benefits will be immediately cut off. To prevent this, you must work with a law firm to structure your Will using specialized legal tools designed for vulnerable adults.
Step-by-Step Process in Ontario
Whether your dependent sibling lives with you in Toronto, Ottawa, or Hamilton, securing their long-term future requires careful planning. Here are the essential steps to draft a highly protective Will in Ontario.
Step 1: Understanding ODSP Asset Limits
First, you and your lawyer must review the current ODSP limits. 📖 Currently, an individual on ODSP can only hold $40,000 CAD in liquid assets. If you leave them $100,000 directly in your Will, they lose their disability funding until they spend that money down. Understanding this strict limit is the foundation of your entire estate plan.
Step 2: Creating a Henson Trust
The solution to the ODSP problem is an absolute discretionary trust, commonly called a Henson Trust. Your lawyer will draft this directly into your Will. Instead of the money going to your sibling, it goes into the trust. Because your sibling does not legally “own” the money in the trust, it does not count towards their ODSP asset limits.
Step 3: Choosing the Right Trustee
A Henson Trust only works if the Trustee has absolute power over the money. 👨💼 You must appoint a highly trustworthy person or a professional trust company to manage the funds. This Trustee will decide when and how to give money to your sibling (for example, paying directly for a new wheelchair or a vacation), ensuring the ODSP rules are never broken.
Step 4: Securing a Housing Trust
If you own a home and want your sibling to live there after you pass, leaving them the deed directly can also cause massive complications. Your lawyer can create a trust that allows your sibling to live in the house rent-free for the rest of their life, while the actual ownership remains with the trust. Once they pass away, the house can be sold and given to your other relatives or a charity.
How Much Does it Cost in Ontario?
Drafting a Will with a Henson Trust is more complex than a standard document, but it is entirely necessary to protect your family member. 💵 Here is a breakdown of the typical legal costs.
| Will Drafting (Including Henson Trust) | $1,000 – $3,000 |
| Powers of Attorney | $200 – $500 |
| Professional Trustee Fees | 3% to 5% of estate value (upon death) |
How Long Does the Process Take?
Meeting with a lawyer to design and finalize a Will containing a Henson Trust generally takes 2 to 4 weeks. ⏳ You will need time to carefully think about who you want to appoint as the Trustee, as they will be managing your sibling’s financial life long after you are gone.
Frequently Asked Questions (FAQ)
Can my disabled sibling be the Trustee?
No. For a Henson Trust to be valid under ODSP rules, the beneficiary cannot have any control over the funds. The Trustee must be a separate, independent person or corporation.
What happens to the trust money when my sibling dies?
In your Will, you will name a “gift-over” beneficiary. This means any money left in the trust when your sibling passes away will automatically go to whoever you choose, such as a niece or a charity.
Can a Henson Trust be set up without a lawyer?
It is extremely risky. The legal wording must perfectly reflect absolute discretion. A single wrong word from a DIY Will kit can invalidate the trust and cost your sibling their ODSP benefits.
Does a Henson Trust avoid probate fees?
No. Because the trust is created within your Will (a Testamentary Trust), the funds pass through your estate first and are subject to Ontario’s Estate Administration Tax.
Can the Trustee use the money to buy groceries for my sibling?
Yes, but with caution. ODSP has strict rules on how much money can be given for daily living expenses. The Trustee must be well-educated on current ODSP regulations to avoid clawbacks.
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