You may already know that at our law office in Stittsville (near Ottawa), we specialize in estates and trusts. As a result, we often meet people who are beneficiaries or trustees of a Henson Trust and who want to understand how it works.
A Henson Trust is a special type of trust that holds the money and assets meant for a beneficiary with a disability. A properly-drafted Henson Trust allows the beneficiary to be left an inheritance indirectly without affecting their benefits under the Ontario Disability Support Program (‘ODSP’). If an ODSP beneficiary receives an inheritance directly, ODSP benefits could be reduced or eliminated … not usually what anyone wants unless the inheritance is a very large amount.
The trust is looked after by a trustee … a person or trust company appointed to manage or administer the Henson Trust assets. Sometimes clients want to know if the trustee can get paid and, if so, how much.
As I explain to our clients, the answer to this question largely depends on the terms of the trust document. This may be a Will but sometimes a Henson Trust is in a separate document. If the Will or trust document is silent on the issue of compensation, we must look at legislation, such as the Ontario Trustee Act, and cases that have been decided by judges.
Trustee (and executor or estate trustee) compensation can vary a lot from one trust to another and from one trustee to another depending on many things. For example, what does the trust document say or not say? What legislation and cases affect the trust? Henson Trust beneficiaries appreciate knowing that there are limits on what a trustee can charge. But it’s also important to know that being a trustee can be a lot of work. It is a responsibility that most people aren’t willing to take on for free if they’ll take it on at all.
If the trust document does not spell out how to calculate compensation, the maximum is usually based on 2.5% of receipts, 2.5% of disbursements plus 2/5 of 1% of the average annual value for care and management. Pre-taking compensation (being paid before the amount is approved) is only allowed if the trust document says so. ‘Pre-taking’ does not mean being paid before the work is done.
If pre-taking is not mentioned in the trust document, the trustee (and executor or estate trustee) must either have the approval of the capable adult trust beneficiaries or must have the approval of a judge before being paid. The approval of a judge is obtained as part of a court process called a ‘passing of accounts’.
If you or a loved one is the beneficiary or the trustee of a Henson Trust and you have questions, call (613-836-9915) or email (firstname.lastname@example.org) to book an appointment to meet with us at our Ottawa office. Usually the legal fees for a beneficiary to obtain legal advice about his or her trust can be paid by the trust. We will review the trust document, discuss beneficiary’s and trustee’s rights and responsibilities including calculating compensation, and answer any questions you have.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.