Henson Trusts: A Plain-Language Guide For Families

by Jeffery A. Keill, CFP, CIM, FMA, FCSI, CEA

Do you have concerns about leaving large amounts of money to someone only to have it affect their existing benefit programs?

A Henson Trust is a way for families to leave money or property for a loved one with a disability without accidentally causing them to lose important government benefits. It is often used by parents, grandparents, or other relatives who want to make sure a beneficiary is cared for after they are gone, and certain situations require special considerations. The basic idea is simple: the money is gifted to a trust, managed by trustees, and not given directly to the beneficiary. The trustees decide and have discretion on when and how to use the money to help improve the beneficiary’s life. Keill and Associates has seen first-hand the value of this important estate planning tool.

Where the Henson Trust Came From

The Henson Trust is named after a Canadian court case involving a father, Leonard Henson, who wanted to provide for his daughter Audrey. His daughter received disability support, so the family needed a plan that would help her without putting those benefits at risk. The court ultimately decided that because Audrey could not force the trustees to give her money, the trust money did not count as Audrey’s own asset.

That decision became very important for families planning for a loved one with a disability. Years later, the Supreme Court of Canada also confirmed that this kind of fully discretionary trust can be treated differently from money owned directly by the beneficiary. In everyday terms, this means a properly written Henson Trust can help protect access to certain income-tested or asset-tested benefits while still allowing extra support from family funds. One such benefit commonly being protected is the Ontario Disability Savings Plan (ODSP).

Why Families Use One

Many government disability programs have rules about how much money or property a person can have. If a person with a disability receives a large inheritance directly, they may no longer qualify for some benefits. This can affect monthly income support and may also affect other supports connected to the program, such as prescription drugs, dental care, or housing help.

A Henson Trust may help to prevent that problem. Instead of giving the money directly to the person, the family leaves it in the trust. The trustees can then use the money for things that make life better, such as clothing, education, therapy, recreation, technology, transportation, accessibility needs, vacations, hobbies, or personal supports. The trust therefore is meant to add and supplement government benefits, not replace them.

How It Works

The most important part of a Henson Trust is that the trustees have complete choice over payments. These payments, or disbursements, can consist of income earned in the trust or the original capital, but it must at all times be at the discretion of the Trustee. The beneficiary cannot demand money from the trust. They also cannot control the trust or close it down to take the money for themselves. This is what helps keep the trust separate from the beneficiary’s own assets.

As you can imagine, choosing the right trustees is very important. Trustees should be people who understand the beneficiary’s needs, the nuances of family values, and can make careful decisions. They may need to talk with family members, caregivers, support workers, lawyers, accountants, or government offices. They also need to keep good records and make sure payments from the trust do not create problems with the benefits it aims to protect from losing.

What the Trust Can Pay For

A Henson Trust is useful because it is flexible. A person’s needs can change over time. Some years they may need more help with personal care, equipment, housing, or transportation. Other years they may need support for social activities, learning, travel, or special experiences. Trustees can make decisions based on what is happening in the person’s life at that time.

Keill and Associates helps families often consider a Henson Trust as part of a larger Estate Plan. That Estate Plan, where there are family members at risk, may include a will, powers of attorney, life insurance, a Registered Disability Savings Plan, and a letter of wishes. A letter of wishes is not usually a legal document and is likely not binding, but it can be very helpful to explain reasons and wishes for the future.

Things Families Should Be Careful About

A Henson Trust must be written properly. Small wording mistakes can create big problems. Rules about disability benefits, which are Provincial in nature, are different across Canada and can change over time. A trust that works well in one province or for one program may need to be reviewed for another situation. Keill and Associates strongly recommend that families not rely on a simple template or informal instructions.

It's best to get prudent professional advice when considering this arrangement. Lawyers who specialize in Estates, as well as your Wealth Advisor, are a great start to understanding the value of a Henson Trust. It would also do the family good to review the plan from time to time, especially after a move, a change in benefits, a change in family finances, or a major change in the beneficiary’s needs.

Taxes and the Henson Trust

A Henson Trust, like all Trusts, is generally treated as a separate taxpayer. Like any individual taxpayer, the Trust must file an annual T3 Trust Income Tax Return and pay tax on income retained within the trust (not dispersed). Income paid or made payable to the beneficiary may generally be taxed in the beneficiary’s hands, while income kept in the trust is taxed under the trust rules. A Henson Trust does not automatically receive special tax treatment: if it is a testamentary trust and meets the requirements to elect as a Qualified Disability Trust, it may access graduated tax rates; otherwise, retained income is typically taxed at the highest marginal rate after the three-year Graduate Rate Estate rules. Trustees should again consult a tax professional before dispersing income and/or filing the T3 Return.

Final Thoughts

A Henson Trust is really about peace of mind for both the trustee and the beneficiary. It helps families support someone they love without putting essential benefits at risk. When it is properly prepared and carefully managed, it can provide extra comfort, choice, security, and dignity for a person with a disability. For many families, a Henson Trust is a practical way to turn care and savings into long-term support.

Disclaimer and Notice to Reader

This Serious Money Paper should not be construed as financial, legal, tax, benefits, medical, or estate planning advice. It is intended only as a general statement and explanation of the topic matter. Program rules can change and individual circumstances matter. Professional financial, tax, legal, medical, and benefits advice should be obtained for the reader’s own personal situation. For more information on this topic or how it applies to your family, please contact our Wealth Advisory Team.

Posted September 2026