Navigating the complexities of estate planning and ensuring financial security for loved ones with disabilities can be a daunting task. In Manitoba, one effective tool that people look at for its flexibility and protective benefits is the Henson Trust. This post aims to shed light on Henson Trusts, detailing their setup, operation, and associated risks to help Manitobans make informed decisions and help you consider if seeing a Winnipeg lawyer for the Henson Trust is the right way to help you plan.
What is a Henson Trust?
A Henson Trust, named after the landmark legal case that established its framework, is a unique type of trust designed to benefit individuals with disabilities (in this case, the “beneficiary”). It is a discretionary trust, meaning that the trustee has full control over if, when, and how the trust’s assets are distributed to the beneficiary. The primary goal of a Henson Trust is to provide financial support to a person with disabilities without affecting their eligibility for government assistance programs, such as the EIA or Manitoba Housing. This is because the assets held in a Henson Trust are not considered part of the beneficiary’s assets.
Setting Up a Henson Trust
Establishing a Henson Trust in Manitoba requires careful planning and adherence to specific legal requirements. The process typically begins with consulting a lawyer experienced in estate planning and trusts. The settlor, who is the person creating the trust, must draft a trust deed or will that explicitly states the trust’s discretionary nature. This document should appoint a trustee or trustees, outline the trust’s terms, and specify the beneficiary or beneficiaries. Choosing a reliable and trustworthy trustee is crucial, as they will have significant control over the trust’s administration and the welfare of the beneficiary.
Operating a Henson Trust
Once a Henson Trust is in effect, its operation hinges on the discretion of the trustee. The key part of a Henson Trust is that no one can require that the trustee pay any of the money to the beneficiary – that is how it avoids being included in the beneficiary’s assets. The trustee is responsible for managing the trust’s assets, making investment decisions, and deciding on the distribution of funds to the beneficiary. They must act in the best interest of the beneficiary, taking into account the beneficiary’s needs, government benefit eligibility, and the trust’s long-term sustainability. Trustees have the flexibility to disburse funds for a wide range of expenses, including living costs, medical care, education, and leisure activities, ensuring the beneficiary’s quality of life is maintained or enhanced.
Risks Associated with Henson Trusts
While Henson Trusts offer numerous benefits, they are not without risks. One significant risk is the possibility of the trustee choosing not to disburse any funds, especially if they are also the residual beneficiary of the trust. This scenario can occur if the trustee, motivated by self-interest, decides to preserve the trust’s assets for themselves rather than using them for the beneficiary’s needs. To guard against this risk, it is essential to choose a trustee who is trustworthy and has the beneficiary’s best interests at heart. Additionally, you can appoint more than one trustee or a professional trust company to ensure checks and balances are in place.
In conclusion, Henson Trusts offer a valuable estate planning tool for families wishing to provide for loved ones with disabilities, ensuring their financial security without compromising their access to government assistance. However, the success of a Henson Trust lies in its careful setup, the integrity and diligence of the trustee(s), and the ongoing management of its assets. By understanding the benefits and potential risks, Manitobans can make informed decisions that align with their estate planning goals, ensuring peace of mind and the well-being of their loved ones.