Henson Trusts: Planning for people with disabilities
A Henson Trust is a tool that can help you provide care and financial support for a person with a disability. It can be established during your lifetime or under theEstate Planning terms of your Will. Henson Trusts can be beneficial in many cases but they are not appropriate for every situation. This article is intended to give you some general information before you explore this planning option with your legal counsel.
What is a Henson Trust?
A Henson Trust is designed to help you financially support a person with a disability. The main reason to use this kind of trust is that it will help your beneficiary while still allowing him or her to receive benefits from means-tested government income support programs. A Henson Trust provides trustees (often family members like Aunts, Uncles, Nieces or Nephews) with the absolute discretion to distribute income and capital from the trust to the beneficiary as they see fit. In short, they have full control, and the beneficiary cannot claim or demand payments from the trust, and so they are not seen as owning the assets.
There is no limit on the amount of assets that can be placed into a Henson Trust. There may, however, be limits on the amount a disabled beneficiary can receive in any given year without disrupting eligibility to income support and benefits. In some cases, pre-approved items like assistance devices may fall outside this limit. It’s important to understand the regulations that govern where you live as you consider whether or not this tool is right for you.
- Improved quality of life
- Financial security
- Tax savings
- Finding an appropriate trustee and associated costs of administering the trust
- Potential changes to legislation
- Gifts from well-meaning others can disrupt well-laid plans
Is a Henson Trust right for you?
A Henson Trust can be a useful tool for some situations, but does have its limits. If a disabled person has significant assets and does not qualify for government income support and benefits, then there is no real advantage to establishing one. However, if you can predict that the disabled person may deplete the assets over time, and could rely on government assistance in the future, it may be worth investigating.
A Henson Trust may also be inappropriate if the value of the inheritance is greater than the amount that the beneficiary would ever receive in government assistance. Take care, however. In some cases, eligibility for income support may also mean the beneficiary is eligible for other benefits like prescription dugs, dental care, glasses, and hearing aids. Research all the benefits available to your beneficiary so you can ensure his or her the best possible standard of living.
As with any estate and financial planning tools, Henson Trusts are complicated. The tax implications alone are vast, and designating a Trustee can be delicate. Consult your legal counsel for professional advice to use—or not use— a Henson Trust to your best advantage.