How You Can Create Life-Long Protection for A Child with A Disability
You want your child to thrive in every possible way. But when your child has a disability, you also need to protect their vulnerability. Providing an ample, continuous source of income is an important part of that protection, offering safety and security to continue long after you are gone.
A Henson Trust, also known as a discretionary trust, is specifically designed to protect the assets of a person who is disabled. It also safeguards your child’s access to government benefits and creates flexibility around estate and tax planning.
A child with a permanent disability is dependent for life on a parent’s income, also receiving government support such as the Ontario Disability Support Program (ODSP). An important consideration is that ODSP payments will be clawed back if your child’s income is too ample. By putting your child’s assets into this trust, you can prevent them from encroaching on other benefits. The current law says ODSP cannot count the money in a Henson Trust when assessing your child’s access to ODSP benefits.
The trustee who administers it can withdraw money as your child needs it. These funds will be taxed to your child as the beneficiary. Strategic planning can minimize this tax burden and ensure an ample income.
One way is for the trustee to withdraw funds and allocate them for disability related costs (support workers, therapy, equipment, etc.). This also ensures ODSP will allow the expenses and it won’t affect the amount of ODSP your child receives.
You can set up a Henson Trust while you are still alive with an inter vivos trust agreement. But it is most often set up in a person’s will. Along with the help of your Financial Advisor, it requires the involvement of a lawyer who has experience with setting up this structure.
This trust offers long-term planning for your child’s needs. You need to carefully choose the trustee you appoint because this is a lifetime responsibility. One option is appointing more than one trustee to ensure continuity throughout the years.
As part of your estate planning, consider how a Henson Trust can help you provide for your child’s future. Give your child continuous support that will outlast parents, grandparents, and siblings. Ask your Financial Advisor for help with setting up this trust and investing its assets.