Aside from protecting disability benefits, there are other advantages associated with the use of a Henson Trust.
First, RDSP’s have a contribution limit of $200,000. A Henson Trust may make sense if a dependent child inherits more than $200,000 from a deceased parents’s RRSP, RRIF or RPP.
A maximum of $200,000 can be rolled over to an RDSP and the remaining inheritance can be transferred to the trust allowing the inheritance to be fully vested without affecting social benefits.
Alternatively, the Henson Trust can be used by the Trustee’s to ‘stream’ contributions into an RDSP for the beneficiary. This can both protect the assets and allow the beneficiary to take advantage of the matching grants and bond, thereby increasing his or her wealth.
Second, the funds contributed to an RDSP are irrevocably donated to the beneficiary. They cannot be taken back by the donor and will pass through the beneficiary’s estate on death of the beneficiary either under the will or by way of provincial intestacy laws.
With a Henson Trust, you can designate a residual beneficiary of the trust when the disabled beneficiary passes away. This is especially useful for a beneficiary who is not mentally capable of establishing a will.
A further reason to use a Henson Trust is to control access of funds and provide good management of the assets. This could be desirable in the case of a beneficiary who is not mentally capable, financially savvy or has a poor lifestyle habits.
Finally, Henson Trust offers flexibility if government grants and or bonds are received in an RDSP within 10 years of a RDSP withdrawal. The grants and bonds will have to be paid back to the government. Henson Trusts do not have this requirement, and consequently might be a better option for short term withdrawals.
RDSP’s and Henson Trusts are complimentary tools. The benefits of RDSP’s and Henson Trusts can be used to maximize support for disabled individuals.