Parents of a child with a disability often ask the same question: how can we leave something for our child without costing them their ODSP? In Ontario the usual answer is a Henson trust. This page explains what it is, why it works, and what else belongs in a plan for a beneficiary with a disability. Law Wise is based in Mississauga and serves the entire GTA and Ontario.
The problem a Henson trust solves
The Ontario Disability Support Program (ODSP) provides income support and benefits, including drug and dental coverage, to eligible people with disabilities. Eligibility depends in part on what the person owns. If a person receiving ODSP inherits money outright and the inheritance takes them over the asset limit, they can lose income support and benefits until the money has been spent. An inheritance meant to improve a child’s life can end up replacing support the child would have received anyway.
ODSP rules that matter for an inheritance
- Asset limit. $40,000 for a single person, plus $10,000 if there is a spouse in the benefit unit and $500 for each other dependant (O Reg 222/98, s 27(1)).
- Inheritance trusts with a limit. A person’s interest in a trust that is available for their maintenance is exempt if the capital comes from an inheritance or life insurance proceeds, but only up to a total of $100,000, together with the cash surrender value of life insurance (s 28(1), paras 19, 20; s 28(3)).
- Payments for disability-related costs. Payments from a trust, and gifts, that are used for approved disability-related items or services are not counted as income.
- Other payments. Other payments from a trust or life insurance policy, and gifts, are exempt as income up to $10,000 in any 12-month period.
Source: O Reg 222/98 under the Ontario Disability Support Program Act, 1997, ss 27 and 28, and the income exemptions in the same regulation. Read on e-Laws on 11 October 2026 (e-Laws currency date 7 October 2026).
ODSP amounts are changed by regulation from time to time. Confirm the current figures before relying on them.
What a Henson trust is
A Henson trust is an absolute discretionary trust. The trustee has complete discretion over whether, when and how much to pay to or for the beneficiary, from income or from capital. The beneficiary has no right to require any payment. Because the beneficiary cannot demand the money, the trust property is not treated as the beneficiary’s asset when ODSP eligibility is assessed, and there is no $100,000 ceiling of the kind that applies to an ordinary inheritance trust. The name comes from an Ontario court case in the late 1980s in which the courts accepted this reasoning, and the Supreme Court of Canada has since confirmed that an interest in a discretionary trust of this kind is not an asset the beneficiary can treat as their own (S.A. v Metro Vancouver Housing Corp, 2019 SCC 4).
The trust protects the capital. Payments out of it still have to be managed. Money paid directly to the beneficiary can count as income unless it falls within an exemption, so trustees commonly pay for disability-related items and services directly and keep other payments within the annual limit.
Why the drafting matters
A Henson trust works only if the discretion is real. If the will gives the beneficiary any enforceable right, for example “income to be paid to my son each year” or “the capital to be paid to her at age 40”, the interest may be counted as an asset. The wording must give the trustee absolute discretion, must say what happens to whatever remains when the beneficiary dies, and should guide the trustee without binding them. The choice of trustee is just as important. The trustee will make decisions about the beneficiary’s quality of life for many years, will need to understand ODSP’s rules as they change, and should not be someone whose own inheritance grows by spending less on the beneficiary, unless that conflict has been thought through. Many families name two trustees and a line of replacements. Parents should also consider leaving a separate letter of wishes that describes their child’s routines, preferences, supports and the kind of spending they hope the trust will make possible.
Setting it up in a will or during your lifetime
Most Henson trusts are created in the parents’ wills and take effect on the death of the second parent. A Henson trust can also be created during the parents’ lifetime, which allows grandparents and other relatives to direct gifts and bequests to the same trust. Either way, every other route by which property could reach the child outright has to be checked.
- Wills of both parents, and the wills of grandparents or others who may leave the child something.
- Beneficiary designations on RRSPs, RRIFs, TFSAs, pensions and life insurance. A designation naming the child directly sends the money to the child, not the trust.
- Intestacy. If a parent dies without a will, the child’s share passes outright under the intestacy rules.
- Jointly held property and gifts from well-meaning relatives.
Other parts of a disability plan
- Registered Disability Savings Plan. A federal savings plan for people who qualify for the disability tax credit, with government grants and bonds. It is treated favourably under ODSP and is often used alongside a Henson trust.
- Decision-making. An adult child who is capable can sign powers of attorney. If the child is not capable of doing so, a guardianship application may be needed.
- Housing. A trust can own or help pay for a home. How that is structured affects both ODSP and tax.
- Tax. A testamentary trust for a beneficiary who qualifies for the disability tax credit may qualify for favourable tax treatment as a qualified disability trust. Ask your accountant.
- Dependant support. A parent who was supporting an adult child with a disability has a legal duty the court can enforce against the estate. Leaving the child out is not a safe way to protect benefits.
How the planning works
- ReviewThe child’s current benefits, needs and supports, and the family’s assets.
- DesignThe trust terms, the trustees and what happens to the remainder.
- DraftThe trust provisions in each parent’s will, or a lifetime trust deed.
- AlignBeneficiary designations, insurance and the plans of other relatives.
- ExplainThe role to the trustees, and prepare a letter of wishes.
- Review againWhen benefits rules, the child’s needs or the family’s circumstances change.
Your file is handled by a Law Wise lawyer licensed by the Law Society of Ontario. Service is available in English, Urdu, Punjabi and Hindi, and, if you retain the firm, fees are explained and confirmed in writing before work starts.
Common questions about Henson trusts
We already left our son an equal share in our wills. Is that a problem?
It can be. An outright share above the asset limit can suspend his ODSP income support and benefits until the money is spent. Changing the gift to a share held in a Henson trust keeps the inheritance available for him without that result.
Who should be the trustee?
Someone with good judgement who knows your child, will be available for many years, and is willing to learn the benefits rules. Many families name two trustees, such as a sibling together with another relative, friend or professional, and name replacements.
What happens to what is left when our child dies?
The will or trust deed should say. Parents commonly name their other children, grandchildren or a charity. If the document says nothing, the remainder may pass in a way you did not intend.
Does a Henson trust work for benefits other than ODSP?
The same reasoning has been applied to some other means-tested programs, but each program has its own rules. Check the specific program, especially subsidized housing and benefits in other provinces.
Can the trust pay for a vacation, a computer or a vehicle?
A trustee can pay for things that improve the beneficiary’s life. How each payment is treated by ODSP depends on what it is for and how it is paid, so trustees should check the current rules or ask before large payments.
Our child does not receive ODSP now. Do we still need this?
If there is a reasonable chance your child will need ODSP in the future, a Henson trust keeps that option open. A discretionary trust also protects a vulnerable beneficiary in other ways, whatever the benefits position.
Planning for a child with a disability?
Bring your current wills and a list of your insurance and registered plans. We will explain how a Henson trust would fit your family.
This page is general legal information for Ontario, current as of 11 October 2026. It is not legal or tax advice and does not create a lawyer-client relationship. For advice about your situation, please speak with a lawyer.