I see many clients who have children with medical conditions, most often varying degrees of autism, that will make it very difficult for them to manage their finances in the future. For these clients, there is a very specific type of trust that I put into their wills to ensure that their children will be cared for financially without them having access to the money directly, if that is appropriate.
A Henson trust is a trust specifically designed for a disabled beneficiary. The name comes from the first case that successfully used this type of trust, done by a couple named Henson. Their daughter, Audrey, had a developmental disability that would make it impossible for her to manage her money. In order to preserve her benefits under the Ontario Disability Support Program (ODSP), her father set up an absolute discretionary trust in his will that provided for money to be placed in trust with the trustee allowed to give money to Audrey, but not required to give her any money at any point during her lifetime. The Ontario government claimed that Audrey had an interest in the trust and attempted to take back her benefits, but Mr. Henson was successful at trial and at the Ontario Court of Appeal. After this case, Henson trusts have become common practice in Ontario for people with disabled beneficiaries.
The trust works by keeping all money in the trust with complete and absolute discretion on the part of the trustee. If the beneficiary needs funds, she or he can ask the trustee, but the trustee has no obligation to give any assets to the beneficiary. It is through this absolute discretion, and only through this, that the beneficiary can legitimately state that he or she does not own the assets and therefore has a low enough income to maintain ODSP benefits, which are significant as they include medical costs.
If you have a child (or other beneficiary) who has income-tied benefits, a Henson trust is an incredibly useful tool in your estate planning.