Providing for a disabled beneficiary without breaking their benefits

Provincial disability benefits — ODSP in Ontario, PWD in British Columbia, AISH in Alberta — are asset-tested. A well-meaning $150,000 bequest, paid outright, can put a beneficiary over the asset limit and cut off the income and (crucially) the drug and health coverage that came with it. The inheritance then gets spent replacing the benefits it destroyed.

This is the most consequential drafting problem on our whole site, and the solutions are well-established.

The Henson trust

Named for an Ontario case and endorsed by the Supreme Court of Canada in 2019 (S.A. v Metro Vancouver Housing), a Henson trust is an absolutely discretionary trust: the trustee has complete discretion over whether and how much to pay; the beneficiary has no enforceable right to demand anything. Because the beneficiary cannot compel payments, the trust’s assets are generally not counted as theirs for benefit asset tests — the trustee can then supplement quality of life (equipment, travel, comforts) while the benefits continue.

Two honest caveats. First, provinces differ in the details — payment streams can still affect income-tested amounts, and each program has its own exemption rules; the drafting must be done against your province’s regime. Second, everything depends on the trustee: they hold genuine discretion for possibly decades, so choose and back them up with the same care as an executor, and consider a corporate co-trustee for large funds.

The RDSP rollover

If the disabled beneficiary is a financially dependent child or grandchild, your RRSP/RRIF can roll over at death into their Registered Disability Savings Plan (ITA s 60.02) — tax-deferred, up to the RDSP’s $200,000 lifetime room. For parents of a disabled child this pairs naturally with the Henson trust: registered money to the RDSP, the rest via the trust.

Meanwhile, do the harmless parts now

A will that names guardians, fixes executors and handles everything else in your estate is still better than no will while you arrange the lawyer’s appointment — and ours costs $15 and can be regenerated free once the trust is drafted to slot alongside it.