Disability Planning and Henson Style Trusts in Quebec

1 novembre 2016 | Troy McEachren

( Disponible en anglais seulement )

In many instances, a parent will not have sufficient assets to fully care for a disabled child for the remainder of his or her life. As a result, access to provincial benefits will be crucial for the disabled child. Provincial legislation for disability benefits generally has a means test; therefore, assets that the child owns can affect the benefits such a child receives. In other words, a lump-sum payment in the form of a bequest could have a significant impact on access to provincial benefits. One common estate planning technique to protect a disabled person’s provincial disability benefits is the use of a discretionary trust commonly referred to as a Henson trust. If properly structured, the assets forming the trust will not have an impact on the disabled beneficiary’s provincial benefits and will still permit a parent to leave assets for the child’s future benefit.

Until recently, there was uncertainty with this type of planning in Quebec even though such trusts have been used in Quebec for decades. Fortunately, the Superior Court of Quebec has confirmed the legitimacy of Henson style trusts in Québec (Curateur public) v. A.N. (Succession de)[1].

In this case, the Public Curator took the position that the trust’s assets had to be used first before the child could receive disability benefits. The Superior Court rejected the Public Curator’s argument and held that a beneficiary of a fully discretionary trust does not have to include the value of the trust’s assets as his or her own assets. This is because the beneficiary of a discretionary trust has no right to the assets of the trust until such time as the trustee exercises his or her discretion. The Court also held that it did not have the power to force the trustees to distribute assets from the trust, as such an order would violate the clearly expressed will of the settlor of the trust. Finally, the Court rejected the Public Curator’s request to modify the trust as the Court’s authority to intervene to make changes to a trust is limited to circumstances where there is some obstacle to the fulfillment of the settlor’s intention or where new measures are required to ensure the fulfillment of such intention. Given that neither condition was met, it had no power to intervene. The net result was that the assets held in the trust would not affect the beneficiary’s right to provincial disability income support.

The Superior Court of Quebec’s decision has ensured Quebec families who have a child with a disability have a vehicle in which they can place assets under the control of someone they trust for such child without disqualifying them from receiving the provincial payments to which they would otherwise be entitled.

[1] 2014 QCCS 616 (CanLII).

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