1. Why Is It Called a Henson Trust?

2. How Does a Henson Trust Work?

3. What Does Alberta Law Say?

4. When Might a Henson Trust Be Useful?

5. Is a Henson Trust the Same as a Qualified Disability Trust?

6. How Is a Henson Trust Created?

7. The Trustee's Ongoing Responsibilities

8. Common Henson Trust Mistakes

9. Costs, Taxes, and Administration

10. When Should You Speak With an Estate Lawyer?

11. How Bridgestone Law Can Help

Introduction

Parents and other family members often want to leave an inheritance that improves the life of a person with a disability. An outright gift, however, may give the beneficiary more money than they can comfortably manage and may affect eligibility for income-tested disability programs. Leaving the person nothing is rarely an acceptable answer.

A Henson trust is a fully discretionary trust designed to benefit a person without giving that person the legal right to demand the trust income or capital. The trustee decides whether, when, and how trust funds will be used. Because the beneficiary does not control the property and cannot compel a payment, the trust property may not be treated as the beneficiary's own asset under an applicable benefit program.

That result is not automatic. The trust must be drafted and administered correctly, and Alberta's current AISH and Alberta Disability Assistance Program (ADAP) rules must be reviewed. Payments from the trust may affect benefits even where the trust capital itself is not counted. Tax, housing, family, and capacity issues also require separate consideration.

Why Is It Called a Henson Trust?

The name comes from an Ontario case involving Leonard Henson, who left property in a fully discretionary trust for his daughter. She had no enforceable right to demand payments or require that the trustee use the property in a particular way. The trust structure became widely known in Canada as a Henson trust.

In S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4, the Supreme Court of Canada considered a similar trust in the context of a British Columbia rent-assistance program. The Court concluded that the beneficiary's interest was not an “asset” for that program because she could not compel the trustees to make payments to her.

The Supreme Court decision confirms an important feature of a fully discretionary trust, but it does not make every Henson trust exempt under every government program. Each program has its own legislation, regulations, policies, definitions, and reporting requirements. Alberta planning must be based on Alberta's current rules.

How Does a Henson Trust Work?

A Henson trust typically involves:

• a settlor or will-maker who creates the trust;

• a trustee who controls and administers the trust property;

• a beneficiary with a disability who may receive benefits from the trust; and

• one or more remainder beneficiaries who receive what remains when the trust ends.

The essential feature is the trustee's complete discretion. The beneficiary cannot require a payment, direct investments, withdraw capital, collapse the trust, or otherwise control the property. The trustee may pay for goods or services directly, reimburse permitted expenses, make payments to the beneficiary, or decide not to distribute at a particular time.

The trustee must still follow the trust document and Alberta law. “Absolute discretion” does not mean freedom to act dishonestly or ignore the beneficiary. The trustee is a fiduciary and must act in good faith, for proper purposes, and in accordance with the trust.

What Does Alberta Law Say?

A Henson trust is not a separate statutory form in Alberta. It is a type of discretionary trust created through carefully drafted terms, usually in a will but sometimes during the settlor's lifetime.

The Wills and Succession Act governs wills and succession in Alberta. When a Henson trust is included in a will, it generally begins after the will-maker's death and the estate transfers the designated property to the trustee.

Alberta's Trustee Act applies to trusts created by wills and other express trusts. It addresses trustee duties, standards of care, reporting, investment, delegation, compensation, appointment and removal, and court powers. The trust document can provide tailored authority, but it operates within this legal framework.

Alberta disability-assistance rules are also central. As of July 2026, Alberta operates AISH and ADAP for different groups of eligible adults with severe disabilities. Both programs assess financial eligibility, including non-exempt assets, and require recipients to report relevant changes. The treatment of a trust and payments from it depends on the governing legislation, regulations, policy manual, trust terms, and recipient's circumstances.

The Alberta government reported a $100,000 limit on non-exempt assets for AISH and ADAP in its July 2026 financial-benefits summary. That limit should not be used as a substitute for proper Henson trust planning. The point of the trust is that the beneficiary does not own or control the trust property; simply keeping an inheritance below an asset limit may fail to address future growth, payments, vulnerability, or other programs.

When Might a Henson Trust Be Useful?

Preserving eligibility for disability assistance

A fully discretionary trust may allow family property to be held for a beneficiary without the capital being treated as an asset available to that beneficiary. This can be important where eligibility for AISH, ADAP, subsidized housing, or another income-tested program depends on asset ownership or access.

The analysis must be program-specific. A trust that works for one benefit may be treated differently for another. The beneficiary or trustee may also have reporting obligations even where no benefit reduction ultimately occurs.

Providing support beyond government benefits

Disability benefits are generally intended to meet basic needs. A trust may enhance the beneficiary's quality of life by funding items or services not fully covered, depending on benefit rules and the trustee's discretion. Examples may include:

• education, training, or recreation;

• dental, vision, therapy, mobility, or personal-support costs;

• technology and communication devices;

• furniture, clothing, or household items;

• travel or family visits;

• transportation;

• supported housing or accessibility improvements; and

• advocacy, legal, accounting, or care-management assistance.

The trustee should confirm how a proposed payment will be characterized before making it. Paying a provider directly does not necessarily make the payment irrelevant to a benefit program.

Protecting a beneficiary who cannot manage a large inheritance

A person may qualify for a Henson-style trust because of benefit concerns, money-management challenges, vulnerability to exploitation, or a combination of factors. The trustee can preserve and invest the fund, coordinate expenses, and reduce the risk of an immediate lump sum being lost or misused.

The arrangement should still respect the beneficiary's dignity, preferences, and abilities. A person may be capable of making many decisions even if help is needed with complex finances. The trustee should involve the beneficiary appropriately rather than treating the trust as a reason to exclude them from their own life planning.

Coordinating support over a lifetime

A long-term trust can provide continuity after parents or caregivers die. It may fund future care, housing, recreation, and professional support while identifying who will make financial decisions and who receives remaining property at the beneficiary's death.

The trust should be part of a broader plan that considers a personal directive, enduring power of attorney, guardianship or trusteeship where relevant, an RDSP, insurance, housing, and the roles of family members and service providers.

Is a Henson Trust the Same as a Qualified Disability Trust?

No. The terms describe different legal concepts.

A Henson trust describes the beneficiary's lack of control and the trustee's complete discretion. Its purpose often includes protecting eligibility for income-tested programs and managing property for a vulnerable beneficiary.

A qualified disability trust, or QDT, is a federal income-tax designation. Under the Income Tax Act, a testamentary trust and an eligible beneficiary may jointly elect for QDT treatment for a tax year if the statutory requirements are met. The beneficiary must generally qualify for the disability tax credit, and other conditions and restrictions apply.

A Henson trust may qualify as a QDT, but it does not do so automatically. A trust can also be a valid Henson trust without receiving QDT tax treatment. The trustee and beneficiary should obtain annual tax advice before making an election.

How Is a Henson Trust Created?

1. Identify the beneficiary's current and future needs

The planning process should consider the person's disability, capacity, income, assets, benefits, housing, family support, life expectancy, and anticipated expenses. The will-maker should also decide whether the trust is intended to hold the entire inheritance or only part of it.

2. Review all applicable benefit programs

AISH or ADAP may be only one part of the beneficiary's support. Subsidized housing, home care, employment supports, federal benefits, and other programs may use different definitions of income and assets. Current written rules should be reviewed rather than relying on assumptions.

3. Choose the trustee and alternates

The trustee has broad power and significant responsibility. The ideal person understands the beneficiary, can manage investments and records, will learn the benefit rules, and can make difficult decisions without being controlling or dismissive.

A sibling or family friend may provide personal knowledge. A professional or trust company may offer expertise and continuity. Co-trustees can combine skills but may create delay or conflict. The will should name alternates and explain how a trustee can resign or be replaced.

4. Draft complete discretionary terms

The document must ensure that the beneficiary cannot demand income or capital, direct the trustee, assign the interest, or collapse the trust. It should give the trustee suitable powers to invest, pay expenses, acquire or maintain property, hire advisers, make tax elections, and deal with benefit agencies.

The terms should also identify the trust's duration, remainder beneficiaries, trustee compensation, reporting obligations, and what happens if benefit or tax laws change.

5. Coordinate how the trust will be funded

The will may direct a share of the estate to the trust. Insurance and registered accounts require separate attention because beneficiary designations can cause proceeds to pass outside the will. Naming the person directly instead of the trust may defeat the plan.

Financial-institution forms must be completed carefully. Tax consequences can differ depending on whether proceeds are paid to the estate, trustee, or beneficiary.

6. Prepare practical guidance

A non-binding letter of wishes can describe the beneficiary's routines, preferences, relationships, goals, services, and the kinds of support the family hopes the trustee will consider. It can also explain how the trust should complement, rather than replace, public benefits.

The letter should guide rather than restrict. Essential legal terms belong in the trust document itself.

The Trustee's Ongoing Responsibilities

The trustee must understand both ordinary trust administration and the beneficiary's benefit environment. Responsibilities commonly include:

• safeguarding and investing trust property;

• keeping it separate from personal and estate assets;

• maintaining detailed accounts and supporting documents;

• considering the beneficiary's needs and preferences;

• checking the benefit effect of proposed payments;

• completing required program reports;

• filing T3 trust returns and slips where required;

• obtaining legal, accounting, investment, or benefits advice;

• reporting to qualified beneficiaries as required by the Trustee Act and trust terms; and

• planning for the trust's eventual termination and distribution.

The trustee should create a decision process early. Records should show what was considered, why a payment was made or refused, and how the decision fits the trust's purpose.

Practical Examples

An inheritance for an adult child receiving disability assistance

Linda's adult son receives AISH and needs support with complex financial decisions. Her will places his share in a fully discretionary trust. The trustee can pay for appropriate supplemental needs while consulting current AISH rules before each significant distribution. Her other children are named as remainder beneficiaries after her son's death.

Insurance intended to fund the trust

Mark creates a Henson trust in his will but initially names his daughter directly as beneficiary of a life-insurance policy. His lawyer identifies that the insurance could bypass the will and be paid outright. Mark obtains coordinated legal, insurance, and tax advice and updates the arrangement so it supports the intended trust structure.

Family and professional co-trustees

Priya wants her brother to remain personally involved in her son's life but is concerned about the technical administration. Her will appoints the brother and a professional co-trustee, defines how decisions are made, and provides a method for replacing either trustee. The plan balances family knowledge with continuity and administrative experience.

These examples are illustrative. Benefit eligibility, tax treatment, and suitable trust terms depend on the actual facts and current rules.

Common Henson Trust Mistakes

Giving the beneficiary a right to demand funds

Mandatory payments, withdrawal rights, or beneficiary control can undermine the fully discretionary character of the trust. The substance matters more than the label “Henson trust.”

Naming the wrong beneficiary on an account or policy

A direct designation may cause a large payment to bypass the trust. The will, insurance, registered accounts, pensions, and ownership arrangements must be reviewed together.

Assuming all trust payments are exempt

Even if the capital is not the beneficiary's asset, a payment may be treated as income or otherwise affect a program. The trustee should check before distributing.

Choosing a trustee only because they are family

The trustee needs judgment, empathy, organization, financial competence, and long-term availability. Family closeness does not guarantee suitability.

Failing to plan for trustee succession

A trust may last for decades. The document should name alternates and provide a practical replacement process.

Ignoring tax filings and reporting

Trusts can have annual T3, beneficial-ownership, accounting, and beneficiary-reporting obligations. Missing them can lead to penalties, disputes, or loss of tax treatment.

Treating benefit rules as permanent

Programs, asset limits, exemptions, and reporting practices change. The trustee needs authority to respond and should obtain updated advice throughout the trust.

Overlooking the beneficiary's voice

Discretion should not become paternalism. Good administration considers the beneficiary's choices, independence, relationships, and quality of life within the legal terms.

Costs, Taxes, and Administration

Creating a Henson trust may involve legal fees for the will or trust agreement and advice from a tax professional, financial planner, benefits specialist, or insurance adviser. A more complex family, large fund, business interest, foreign asset, or professional trustee will generally require more planning.

After the trust begins, costs may include trustee compensation, investment management, accounting, T3 preparation, legal advice, benefit consultations, and property expenses. A professional trustee may charge according to an agreed fee schedule. A family trustee may also be entitled to compensation under the document and Alberta law.

Most testamentary trusts are not automatically taxed at graduated personal rates. A Henson trust may qualify as a QDT for a particular year if all statutory conditions are met and the required joint election is made. Otherwise, retained income may be taxed at the top marginal rate, while amounts paid or made payable to a beneficiary may have different treatment. Tax advice should be obtained before distributions and elections.

The trust's value is not measured only by tax savings. Its primary purpose is often to provide durable support and preserve access to programs. The expected benefit should nevertheless be weighed against long-term administrative cost.

When Should You Speak With an Estate Lawyer?

Advice is particularly important when:

• a beneficiary receives or may apply for AISH, ADAP, subsidized housing, or another income-tested program;

• the beneficiary has difficulty managing money or may be vulnerable to exploitation;

• life insurance or registered accounts are intended to fund the trust;

• the trust may qualify as a QDT;

• the proposed trustee lives outside Alberta or Canada;

• the trust will hold a home, business, or substantial investment portfolio;

• several family members may disagree about administration;

• the beneficiary is a minor or may need guardianship, trusteeship, an enduring power of attorney, or a personal directive; or

• an existing will uses mandatory payments or outdated benefit assumptions.

A lawyer can coordinate the trust with the will and asset designations, draft the necessary discretion, explain trustee duties, and identify where tax or benefits advice is needed. The beneficiary's circumstances and preferences should be included appropriately in the planning process.

This article provides general legal information and is not a substitute for advice about a particular trust, benefit program, beneficiary, or tax matter.

How Bridgestone Law Can Help

Bridgestone Law assists individuals and families in Calgary and throughout Alberta with Henson trusts, wills, estate planning, probate, and estate administration. We can help assess whether a fully discretionary trust fits your goals, select practical trust terms and decision-makers, and coordinate the trust with insurance and beneficiary designations.

Careful drafting and ongoing administration can help an inheritance improve a beneficiary's life without creating avoidable risk to the supports on which they rely.