Audrey Veltri, IG Wealth Management & Amanda L.C. Bruni, Bruni Law
The spring of 2018 saw the passing of “An Act to Strengthen Financial Security for Persons with Disabilities” or more commonly referred to as ‘Bill 5’ or’ The Henson Trust Bill’. (This amended the Assured Income for the Severely Handicapped Act and Regulations.)
The amended legislation is now well underway and offers Albertans more confidence and the ability to plan without the fear of negatively impacting your loved one’s future eligibility for social assistance programs, such as AISH.
To begin this discussion let’s look at what a trust is? It is not a suitcase of money that is held with your lawyer or bank – nor is it some giant bank account from where the rich fund their lavish lifestyles. Think of it rather as a piece of paper which contains specific instructions for the disbursements of assets.
A trust is simply a legal arrangement between the Settlor, who establishes the trust over certain assets (the person giving the property or asset(s)), and the Trustee, who holds the property for the benefit of the Beneficiary (the person(s) who will benefit from the property). Trusts can be living trusts, established while an individual is alive, or testamentary trusts which are created under the terms of an individual’s Will that come into effect on the individual’s death. In the case of a discretionary Henson Trust, either may be applicable.
A Henson Trust is a discretionary trust characterized as an arrangement whereby the trustee is given absolute discretion regarding the use of the income and/or capital from the trust. The trustee has the discretion to make payments to the beneficiary and the beneficiary is unable to claim or demand payments from the trust. As such, the beneficiary has no vested interest in the trust and therefore the trust is not an ‘asset’ of the beneficiary. The trust will provide instructions to the Trustee as to how to use the funds for the benefit and/or protection of the beneficiary.
Another component to the discretionary trust is that it requires the designation of a residual beneficiary, a secondary person who will receive or benefit from the property in the future upon the death or change of circumstances of the primary beneficiary.
It is the above discussed features that provide its protective status for AISH purposes. To be eligible for AISH an applicant and their cohabiting partner must not have assets in excess of $100,000. Effective April 1, 2018, the amendments provide that the discretionary trust is an exempt asset such that the value of the capital of the discretionary trust will not count toward the $100,000. There is also no limit on the amount or value of the discretionary trust. The amendments also provide a one-year grace period permitting the AISH recipient time to move an inheritance or lump sum payment into a discretionary trust or other exempt asset.
AISH eligibility also requires that the income of an applicant and their cohabiting partner must not exceed a maximum amount. Income received from the trust will continue to be subject to eligibility limits under the AISH Act and Regulations.
So, what does this mean for families who want to provide for a disabled loved one? A proper discretionary trust allows for assets to be available for the benefit of a beneficiary with the intention of improving his or her quality of life and providing security for the future while at the same time ensuring government support and programs continue.
A discretionary trust can be a helpful tool for estate planning. If you have set up a trust as part of your estate, it is important to ensure that it best reflects the current state of the law. In some cases, the recent developments we have discussed may require updates to your estate planning documents. We are pleased to set a no obligation preliminary estate review.
This publication is not provided as legal advice but for information purposes only. Although a discretionary trust may be a useful tool in estate planning, it is always best to obtain advice from a legal advisor, financial planner and tax advisor to determine the suitability of a discretionary trust as part of your estate planning.
If you have any questions about this article or planning for your future, please connect.
We provide guidance to families supporting dependents with a disability. We ensure families have effective access to all available financial and government programs and implement strategies to ensure that we protect these supports through periods of transition and at all life stages. We create solutions so families can enjoy today, embrace tomorrow and secure a comfortable, safe and healthy future for the whole family.
Amanda L.C. Bruni is the owner of Bruni Law, a two generation law firm located in the community of Marda Loop. Amanda and her firm have years of experience helping families plan for their future with a specific expertise with legal issues related to the protection and support of persons with disabilities and persons dealing with capacity issues. Bruni Law practices in the areas of estate planning as well as guardianship and trusteeship applications.