How to Set Up a Henson Trust for Your Disabled Child in Ontario

Steps in this guide

1. 1

   Understand How a Henson Trust Works

   A Henson Trust is an absolute discretionary trust where the trustee has complete discretion over when and how funds are distributed to the beneficiary. Because the beneficiary has no legal right to demand distributions, the trust assets are not counted as the beneficiary's assets for ODSP purposes. This allows the beneficiary to maintain eligibility while having access to supplemental funds.

2. 2

   Consult a Disability Estate Planning Lawyer

   The wording matters. Ontario says all terms of the trust and will must be considered when deciding whether it is an absolute discretionary trust.

3. 3

   Choose Your Trustee Carefully

   The trustee manages the trust and makes all distribution decisions. Choose someone who understands your child's needs, is financially responsible, and is likely to outlive you. Consider naming a professional trustee or trust company as a backup. Avoid naming the beneficiary or their spouse as trustee, as this can jeopardize the trust's ODSP protection.

4. 4

   Define the Trust Terms

   Work with your lawyer to draft the trust document. Key provisions include: the absolute discretionary nature of distributions, trustee succession plans, investment powers, guidelines for how funds should be used (quality of life enhancements, not basic needs already covered by ODSP), and provisions for trust termination and residual beneficiaries.

5. 5

   Fund the Trust Through Your Estate Plan

   Most Henson Trusts are funded through your will (testamentary trust). Update your will to direct the inheritance to the Henson Trust rather than directly to your disabled child. Coordinate with RRSP/RRIF beneficiary designations and life insurance policies. Consider an RDSP rollover upon death to maximize tax efficiency.

6. 6

   Communicate the Plan to Family

   Inform other family members — especially grandparents and relatives who may leave bequests — about the Henson Trust. Well-meaning relatives who leave money directly to your disabled child could inadvertently jeopardize their ODSP eligibility. Provide them with the trust details so they can direct any gifts or bequests appropriately.