In an important decision released on January 25, 2019, the Supreme Court of Canada has confirmed that families can make arrangements to ensure that, after their death, their loved ones with disabilities will be financially supported while at the same time maintaining access to much-needed social services and housing.
Background on the Case
Families often use a type of trust, called “Henson trusts”, as a way to support family members with serious disabilities. When money is in a Henson trust, the person in charge of the trust (the “trustee”) has control over when, how and if the money is paid out to the recipient.
This kind of trust is used to make sure that the family member with a disability can still get supports from social programs like social assistance and social housing. In these programs, a person’s income and assets are typically included when calculating whether or not they are financially eligible for benefits. If money is paid from the trust, social programs count it as “income” when deciding if the person qualifies. But, in Ontario at least, any money still in the trust has not been considered an “asset” because the recipient has no certain access to it. This is important because if the money in the trust is considered an asset, they may not be eligible for benefits.
But in a case called S.A. v. Metro Vancouver Housing, the Vancouver social housing program wanted to treat S.A.’s inheritance as an asset even though it was being held in a Henson trust. When she refused to provide information about how much money was in the trust, her application to renew her rent subsidy was turned down.
The Income Security Advocacy Centre (ISAC) and HIV AIDS Legal Clinic Ontario (HALCO) intervened as a coalition to try to make sure the Court’s decision would not have a negative impact on social assistance and social housing recipients in Ontario. The coalition was represented by Ewa Krajewska of Borden Ladner Gervais.
What the Supreme Court said
The Supreme Court ruled that a Henson trust is not an asset, and that S.A.’s trust should not negatively affect her eligibility for Vancouver’s rent subsidy program. The Court further found that Metro Vancouver Housing was wrong to demand that S.A. provide documents to show how much money was in the trust.
Ms Krajewska, the lawyer for the coalition, said, “This is a very good decision for the disability community, as it provides clear, helpful guidance on the attributes of a Henson Trust. The ‘mere hope’ of receiving money from a trust is not enough to make it an asset.”
This is the first time that the Supreme Court has had to make a decision about a Henson trust. “The Supreme Court’s decision confirms that Henson trusts are a legitimate way for families to set aside money for persons with disabilities to sustain their long-term well-being,” said Amy Wah of HALCO.
“We know that persons with disabilities are more likely to live in deep poverty and remain poor over long periods of time,” said Marie Chen of ISAC. “The Court’s decision will help alleviate their poverty by preserving access to much needed social programs which provide income support, drugs and other medical benefits.”
The read the decision, click here: https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/17473/index.do.
What the case means for you
The Supreme Court’s decision confirms the way that courts and social programs in Ontario have been treating Henson trusts: they are not and should not be counted as assets.
That means that families now have certainty in planning how they leave their estate to their family members. As the law stands now, social programs should not count money in trusts as an asset, so long as the trust has these characteristics:
- The trustee (or trustees) have exclusive discretion about whether to pay any money out of the trust. They have no legal obligation to exercise that discretion in any particular way.
- The recipient has no way to end the trust and pay out all the money.
Even a trust in which the recipient is a “co-trustee” with someone else will be considered a Henson trust, so long as the trust has these two features. Allowing recipients to be co-trustees is important because it allows persons with disabilities to be part of decisions about their own finances.
To read more about the case, check out these links:
- Borden Ladner Gervais Blog: https://blog.blg.com/theexchange/Pages/Post.aspx?PID=395
- Canadian Lawyer Magazine: https://www.canadianlawyermag.com/author/tim-wilbur/scc-says-trust-is-not-disqualifying-asset-for-rental-assistance-application-16756/