Trusts are one of the most commonly used planning tools in an estate plan involving a person with disabilities (“PWD”). Trusts are popular for both the structure and flexibility they can provide, but also for the ways in which a trust can be used to protect a PWD’s entitlement to disability benefits while still providing that person with the benefit of the assets in trust.

In most cases, disability benefits are subject to an asset restriction wherein the PWD is permitted to own up to a set amount. For example, the BC Employment and Assistance for Persons with Disabilities Act prescribes a maximum threshold of $100,000 for an individual PWD and/or $200,000 for a family unit with two PWDs. There are also income limits that restrict what a PWD can earn. When assets are held or income is earned over and above these thresholds, the PWD will lose some or all of their entitlement to government assistance.

It is important to note that not all trusts are created equal, and careful planning is required when it comes to trusts for PWDs. Whereas non-discretionary trusts will generally be included in calculating a PWD's entitlement to benefits and assistance, discretionary trusts will not.

A discretionary trust is one where the beneficiary has no control over the capital or income of the trust; rather, total control vests within a separate person or entity (the trustee). Often referred to as a ‘Henson Trust’, this particular planning tool tends to be of the broadest appeal, given that assets held in this type of trust have no threshold restrictions and can therefore yield the best results in providing for a PWD without negatively impacting their disability benefits.

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This article is intended for information purposes only and should not be taken as the provision of legal advice. Grace C. Cleveland is a lawyer with the law firm of Cleveland Doan LLP and can be reached at (604)536-5002 or grace@clevelanddoan.com.