Leaving money directly to a family member who receives government disability benefits can inadvertently disqualify them from those benefits. Careful planning is required to provide for a disabled loved one without creating problems.

The Problem with Direct Gifts

In Nova Scotia, eligibility for income assistance and disability-related benefits is means-tested. If a person with a disability inherits money or assets outright, those assets may be counted against their eligibility thresholds, potentially disqualifying them from benefits they depend on until the inheritance is spent down.

Henson Trusts

A Henson Trust (also called an absolute discretionary trust) is the most common solution. In a Henson Trust, the Trustee has absolute discretion over whether and how to distribute trust funds to the beneficiary. Because the beneficiary has no guaranteed right to the funds, they are generally not counted as the beneficiary's asset for benefit eligibility purposes.

The Henson Trust is named after an Ontario case, but the structure is used and recognized in Nova Scotia. A properly drafted Henson Trust allows you to leave assets for a disabled family member's benefit — supplementing rather than replacing their government support.

Choosing a Trustee

The Trustee of a Henson Trust holds significant power and responsibility. They must exercise discretion in the beneficiary's best interest over potentially many years. Choose someone who:

  • Understands the beneficiary's needs
  • Can manage assets prudently
  • Will remain available and capable over a long time horizon
  • Has no conflict of interest with the beneficiary

A successor Trustee should also be named.

Other Considerations

Registered Disability Savings Plans (RDSPs) are another tool for providing for a person with a disability over the long term and have their own contribution and grant rules. A Will can direct estate funds into an RDSP subject to applicable limits.

When to Get Professional Advice

Planning for a disabled beneficiary involves interaction between estate law, tax law, and benefits eligibility rules. A practicing estate lawyer should be involved in drafting a Henson Trust. This is one situation where the complexity justifies the additional cost.