Special Needs Planning
What is a trust?
Trusts are unique and useful tools with a long history reaching back to the time of the crusades. Crusader knights were abroad for years and required a steward who was able to deal with their estates in their absence, while they themselves retained the right to the income and benefits the estates provided. The English Law of Trusts was developed to accommodate these needs. Trusts are commonly used in Wills for a large variety of reasons.
All trusts involve a triangular relationship: The owner of property (a settlor) transfers his or her ownership to another (a trustee) for the benefit of a third person (a beneficiary) source; Westbury Wills UK
The monks started it all
Special Needs Trusts have been established in the English common law legal system for over 1,000 years. They evolved broadly because monks who took a vow of poverty could not own property. Monks bound by their vows of poverty also needed someone to administer the large estates that they acquired. Their estates were transferred into a trust where the trustee had the absolute discretion over the assets held in the trust.
An Absolute Discretionary Trust sometime called a “Special Needs Trust” or “Henson Trust” makes it possible for an individual with a disability who receives government disability benefits, to inherit an estate without losing their government benefits. In Ontario Canada Leonard Henson left his estate in a trust for his daughter Audrey, who was receiving disability Benefits from the Ontario Government. The Ontario government tried to cut off her benefits, but in 1989 the Ontario Court of Appeal ruled in her favour. The precedent was set as Mr. Henson had left his estate in an absolute discretionary trust over which Audrey had no control, the trustee was given the absolute and unfettered discretion as to the use of the funds in the trust and Audrey had no legal vested interest in the trust.
No one likes to think about death, but it’s a fact of life and for parents who have a child with a disability a Special Needs/Henson trust can be created, during their lifetime (an inter Vivos trust) or according to the terms of their will (a testamentary trust). These trusts are essential when planning the future financial security of their child when the parents are no longer there. These special arrangements are necessary to properly ensure that their child will have the funds for those little extras they deserve and that their inheritance will not be wasted.
On this website you will find:
A precedent for a testamentary Special needs/Henson Trust
Testamentary trusts are funded with assets from the parent’s estate
A precedent for a Life insurance Special needs/Henson Trust
Life insurance is often purchased as a means of funding a trust on the death of the parent(s).
A precedent for an Inter Vivos or Living trust.
Canadian families can use the “Preferred Beneficiary election” to reduce the income tax on inter Vivos and testamentary trusts created for a person with a disability who has qualified for the Disability Tax Credit.
These precedents could save families from $1,200 to $3,500 in legal fees:
What is a trust in legal terms?
In common law legal systems, a trust is a relationship between three parties whereby property (real or personal, tangible or intangible) is transferred by one party to be held by another party for the benefit of a third party. A trust is created by a settlor (archaically known as the feoffor to uses), who transfers some or all of his property to a trustee (archaically known as the feoffee to uses), who holds that trust property (or trust corpus) for the benefit of the beneficiaries (archaically known as the cestui que use, or cestui que trust). The trustee has legal title to the trust property, but the beneficiaries have equitable title to the trust property (separation of control and ownership). The trustee owes a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property. (Note: A trustee may be either a natural person, or an entity, and there may be a single trustee or multiple co-trustees. There may be a single beneficiary or multiple beneficiaries. The settlor may himself be a beneficiary.).
The trust is governed by the terms under which it was created. The terms of the trust are most usually written down in a trust instrument. The terms of the trust must specify what property is to be transferred into the trust, and who the beneficiaries will be of that trust. The trust is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust and the governing law.
In the United States, the settlor is also called the trustor, grantor, donor or creator. In some other jurisdictions, the settlor may also be known as the founder.
Person setting up the trust. The person is commonly known as the trustor, though you may sometimes see the terms settlor or grantor.
Objective of the trust. You use different types of trusts to achieve a variety of specific estate-planning objectives. You can use some trusts for a single estate-planning objective, while others help you achieve more than one goal.
Specific kind of trust. Trusts come in many different varieties. Regardless, when you’re setting up a trust, you need to decide what type of trust you want and make sure that you follow all the rules for that particular type of trust to make sure that it’s proper and legal, and carries out your intentions.
Property. After you place property into a trust, that property is formally known as trust property.
Beneficiary. Just like with other aspects of your estate plan (your will, for example), a trust’s beneficiary (or, if more than one, beneficiaries) benefits from the trust in some way, usually because the person or institution will eventually receive some or all of the property that was placed into trust.
Trustee. The person in charge of the trust is known as the trustee. The trustee needs to understand the rules for the type of trust he or she is managing to make sure everything in the trust stays in working order.
Rules. Finally, some of the rules that must be followed are inherently
John Dowson, Ch Ip Executive Director
"Just imagine what your Childs future could be if you make the right plans"
"If you want to leave your child more than just memories, there is no better time than the present to plan for your child's future."