A recent decision from the Supreme Court of Canada (SCC) appears to confirm the viability of Henson trusts, special trusts set up for people with disabilities. The decision, released in late January and the first case in which the SCC has considered Henson trusts, indicates that these are useful vehicles for tax, estate and financial planning purposes.
In S.A. v Metro Vancouver Housing Corp., the SCC ruled that the beneficial interest in a Henson Trust belonging to S.A., a woman living with a disability, should not be considered her asset when determining her eligibility for publicly subsidized housing. The SCC overturned rulings by the Supreme Court of B.C. and the province’s Court of Appeal that the trust should be considered an asset of S.A.
Henson trusts are established so that assets held in trust for the benefit of a person living with a disability are not considered assets belonging to the beneficiary, and thus do not put at risk that individual’s eligibility for asset-tested government benefits. To be considered a Henson Trust, a number of conditions have to be met, including that the trustee has absolute discretion over distributions. Henson trusts have been in common use throughout Canada since an Ontario court decision more than 30 years ago.
S.A. had been living in publicly subsidized housing in Vancouver since 1992 and receiving rental assistance. In 2012, following S.A.’s father’s death, a trust was established for S.A.’s benefit. S.A. and her sister were trustees of the trust, and both were required to agree in order to make a decision. In 2015, the housing corporations asked for information regarding S.A.’s trust, indicating that the assets in the trust would be included in determining whether she met the eligibility requirements for assistance. S.A. declined to give the housing corporation information regarding the trust on the grounds that the trust shouldn’t be considered an asset. Without the information it was seeking, the housing corporation denied her rental assistance.
In making its decision, the SCC noted that no definition of “asset” had been included in the tenant agreement between the housing corporation and S.A. Using the common definition of “asset” as being a “valuable property” that one can use to pay for products and services, the SCC found that the trust wasn’t an asset because the beneficiary, S.A., did not have unilateral authority to access the assets in the trust. In this case, distributions from the Henson Trust could be made only by unanimous decision of the trustees.