Caring for a disabled child can prove to be very costly for a parent. Access to provincial disability benefits is crucial to ensure their child will receive the necessary financial help throughout their life. However, disability benefits are not always guaranteed and could be reduced or even discontinued in the future depending on the child’s financial situation. Provincial legislation for disability benefits generally use a means test to assess the amount of aid the child will have access to. This means the assets that the child owns can directly affect the benefits he or she receives. For instance, a lump-sum payment in the form of a bequest or assets inherited by the child from his parents could significantly impact his or her eligibility for provincial benefits. Thus, it is vital for a parent to take preventive measures prior to death to ensure their child will have continued access to benefits throughout his life.

One common estate planning technique to protect a disabled person’s provincial disability benefits is the use of a fully discretionary trust specifically designed to benefit persons with disabilities. This type of trus is generally 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 as the beneficiary’s interest in the trust is not considered to be an asset for the purposes of the provincial means test mentioned above. Thus, a parent can leave assets for the child’s future benefit without hindering their ability to receive provincial benefits. In other words, a Henson Trust allows a disabled beneficiary to receive an inheritance as well as continue to receive the provincial disability benefits.

Henson style trusts have been used in Quebec for the purposes of estate planning for disabled persons for decades. However, until recently, their legitimacy and effectiveness had never been formally recognized by the Quebec court system. In 2016, the Superior Court of Quebec rendered a favorable judgement confirming the legitimacy of Henson style trusts in Québec (Curateur public) v. A.N. (Succession de)[1].

In this case, the Public Curator argued that in order for the disabled child to be eligible for disability benefits, the trust’s assets had to be exhausted. The Superior Court refused to subscribe to this argument and held that the beneficiary of a fully discretionary trust is not obliged to include the value of the trust’s assets when determining the value of his or her own assets. The superior court’s decision was predicated on the idea that 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. Additionally, the Court concluded it did not have the power to force the trustees of the trust to distribute assets from the trust, given the fact that such an order would violate the clearly expressed will of the settlor of the trust. Lastly, the Court rejected the Public Curator’s request to modify the trust. The court held that=it was not vested with the authority to intervene to make changes to a trust as its power to modify a trust is restricted to circumstances involving an obstacle that is limiting or preventing the fulfillment of the settlor’s intention.

Ultimately, the Superior Court’s decision means that assets held in a fully discretionary trust are not to be considered when determining a disabled person’s eligibility to provincial disability income support. The decision alleviates stress and uncertainty for numerous Quebec families as they can now rest assured their disabled child will not become ineligible for provincial disability benefits.

[1] 2014 QCCS 616 (CanLII)