Canada: Can You Put Your Trust In A Henson Trust? That Depends, Says The Supreme Court Of Canada In S.A. v. Metro Vancouver Housing Corp.

Last Updated: February 4 2019
Article by Catherine Blomquist

On January 25, 2019, the Supreme Court of Canada considered, for the first time, "Henson trusts" and the nature of a disabled beneficiary's interest in them for the purposes of determining eligibility for social benefits programs. A Henson trust, frequently characterized as an "absolute discretionary trust", is an estate-planning tool that people (often parents) use to benefit a disabled person (often their child) with the goal of protecting the disabled beneficiary's assets while preserving and maximizing their access to program benefits. The Court's decision in S.A. v. Metro Vancouver Housing Corp. confirms Henson trusts are a valid estate-planning tool, but whether a particular Henson trust is effective to meet the goal depends:

  • On the terms of the particular trust. Whether it's a Henson trust – and the nature of the disabled beneficiary's interest in it – will depend on whether it exhibits two essential features, giving the disabled beneficiary only a hope, and not an enforceable right, to distribution from it. Those structuring the trust must take care to ensure it does so.
  • On the specific social benefits program terms. The impact of a Henson trust on a disabled beneficiary's eligibility for or entitlement to a social benefits program is based on the specific terms of the program in issue. Depending on the program and the province, those terms could be set out in legislation, in regulations, or elsewhere. Those structuring a Henson trust need to be familiar with the terms of the target program(s) – and how courts have, or are likely to, interpret them.
  • In some cases, on contract terms. Some program terms will be contractual – and contractual interpretation principles will apply to determine whether, and how, the disabled beneficiary's interest in a Henson trust affects their eligibility to its benefits. Again, familiarity with those terms is helpful to structuring a Henson trust.

In S.A. v. Metro Vancouver Housing Corp., the not-for-profit Housing Corporation managed a subsidized rental housing complex under agreements with a B.C. government agency. However, the Housing Corporation offered additional rental assistance on a discretionary basis to tenants who satisfied eligibility criteria set out in the Corporation's policy. The policy defined, among other things, "assets" for the purposes of applicant tenants' eligibility to the additional assistance. S.A. had been residing in the housing complex since 1992, and had qualified for the rental assistance every year. In 2012, S.A. became the beneficiary of a Henson trust. Under its terms, the trustees had the absolute discretion to make payments from the income and capital for S.A.'s benefit; however, S.A. couldn't compel the trustees to make any payments to her nor unilaterally collapse the trust. In 2015, the Housing Corporation requested that S.A. disclose the trust balance on the basis her interest in it was an "asset" that could affect her eligibility for the discretionary rental assistance. When S.A. refused, the Housing Corporation denied her assistance application on the grounds her interest in the trust was an "asset" and its value was required to determine her eligibility for assistance. But the majority of the Supreme Court of Canada judges disagreed:

It depends on the trust terms. The terms of the trust define the nature of the trust – and of the beneficiary's interest in its assets. The Court described the two "essential features" of a Henson trust, characterizing the disabled beneficiary's interest in them as "akin to a mere hope that some or all of [the trust's] property will be distributed to [the beneficiary] at some point in the future", with no actual enrichment or enforceable right to receive any of its income or capital:

  • Trustees' exclusive discretion to make payments. The trust terms don't confer any fixed entitlements on the beneficiary: even if they require the trustees to consider whether to make any payments, they give the trustees ultimate and absolute discretion over whether to make any payments out of the trust to or for the benefit of the beneficiary – or whether not to. Thus the beneficiary doesn't have an enforceable right to receive anything "unless and until"the trustee(s) decide to exercise their discretion in the beneficiary's favour (unlike the beneficiary of a "fixed trust", where the trustee has no discretion respecting distributions to the beneficiaries). The fact the disabled beneficiary is a co-trustee might not be relevant at all to the nature of their interest in the trust. In this case, it wasn't: the limitations the trust terms imposed effectively prevented S.A. from unilaterally ordering trust payments to herself, giving her no more access to its assets than a beneficiary who's not also a trustee of a Henson trust.
  • Beneficiary can't unilaterally terminate the trust. The structure of the trust prevents the beneficiary from terminating it on their own under the rule in Saunders v. Vautier. That rule permits a trust beneficiary (or multiple ones acting jointly) to terminate it and demand the trustee transfer the trust capital to them if the beneficiary has capacity – and is absolutely entitled to all the rights of beneficial ownership in the trust property. In this case, the trust terms requiring any remainder of the trust fund must pass to some third party upon S.A.'s death and specifically prohibiting her from appointing either herself or her creditors as remainder beneficiaries meant her interest in the trust wasn't absolute.

It depends on the specific social benefits program terms. The Court issued an important caution: whether, and if so how, a Henson trust affects a disabled beneficiary's eligibility for or entitlement to any particular benefits program must be determined on a case-by-case basis depending on the specific terms of the program that's in issue.

In might depend on contract terms. In some cases, the terms of the "program" will be set out in a contract rather than in legislation or a regulation. Those cases will ultimately be a contractual dispute, and the principles of contractual interpretation will apply to ascertain whether, and how, the disabled beneficiary's interest in a Henson trust affects their eligibility to the (contractual) benefits. And that was the situation in this case: the Court decided S.A. didn't have a contractual entitlement to rental assistance from the Corporation even if she met the eligibility criteria, but the tenancy agreement imposed a contractual obligation on it to consider a complete application for rental assistance submitted by S.A. Whether S.A.'s interest in the trust was an "asset" the Corporation could consider depended on the interpretation of the word "assets" as used in the assistance application. The Court decided it wasn't broad enough to encompass S.A.'s interest in the trust, so that interest wasn't an "asset" that could disqualify her from the Corporation's consideration for rental assistance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
 
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Canada LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions