For parents of a child with a disability, estate planning is about far more than distributing assets, it is about ensuring long-term security, dignity, and continuity of care. In Ontario, many families rely on the Ontario Disability Support Program (“ODSP”) to provide essential income and health benefits, yet the program’s strict limits on income and assets can make traditional gifts or inheritances problematic. Discretionary, or “Henson” trusts have become a key estate-planning tool for parents who want to set aside funds for their child’s future, while ensuring those funds are not counted towards ODSP calculations and thereby jeopardizing access to ODSP. This article briefly explains how ODSP works, why its financial rules matter in estate planning, and how Henson trusts can help families plan with confidence.

What is the Ontario Disability Support Program

ODSP offers money to help eligible recipients with living expenses, health benefits and employment support. In order to be eligible to receive ODSP, you must be at least 18 years of age, be an Ontario resident, have assets no greater than the limits set out in the program, be in financial need, and meet the programs definition of a person with a disability or be a member of a prescribed class. If you are a member of a prescribed class, you do not have to go through the disability adjudication process, however you must still meet all other ODSP eligibility criteria, including income requirements. Members of prescribed classes include, for example:

• • A person who is 65+ years old and is not eligible for Old Age Security
  • A resident or former resident of homes that are part of the Community Homes for Opportunity program
  • A person who receives the Canada Pension Plan Disability benefits or the Quebec Pension Plan Disability benefits

Given that ODSP is a means-tested form of support, your eligibility is based on your financial situation, including your income and assets, living expenses, family size and make-up, as well as shelter costs. Typically, a single ODSP recipient is permitted to own up to $40,000 in assets and a couple is permitted to own up to $50,000 in assets (2026 rates). Certain items are exempt from the calculation, such as:

• • Your primary residence
  • Your primary vehicle
  • Trust funds derived from an inheritance or life insurance policy, up to allowable limits
  • The cash surrender value of life insurance policies, up to allowable limits
  • Pre-paid funerals
  • Registered Education Savings Plans (RESP)
  • Registered Disability Savings Plans (RDSP)
  • Necessary household and personal items, such as furniture and clothing

Generally, if a person receives too much money directly, including through inheritances or gifts, they may become ineligible for ODSP, often referred to as “claw backs”. However, there are certain exceptions in terms of what income is included. Generally, the following sources of income may be exempt from the asset or income calculations, such as:

• • Child support
  • Certain federal tax benefits
  • Certain provincial tax benefits
  • Payments from a registered disability savings plan (RDSP)
  • Ontario student assistance program (OSAP) loans
  • Income from inheritances that are placed into certain types of trusts

Discretionary / “Henson” Trusts

One of the types of trusts from which income is often exempt is a Henson trust. These trusts are generally created for the benefit of persons with disabilities without affecting their entitlement to means-tested government benefits, such as ODSP. Henson trusts can be testamentary or inter vivos. In other words, they can be created through a will, or they can be established during a person’s lifetime.

The defining feature of a Henson trust is that it is a fully discretionary trust. The trustee has the sole and absolute discretion to make payments to the beneficiary from the trust, therefore the beneficiary does not have a legal claim to the property held in trust. In other words, the assets of the trust and the income generated from the trust investments do not fully vest in the beneficiary. As a result, a properly created Henson trust would allow the trust property to be exempt from ODSP asset limits and would generally not affect ODSP entitlement.

In terms of the discretionary income that the beneficiary receives from the Henson trust, for the purposes of ODSP, payments to the beneficiary may be exempt as income when used in certain circumstances, such as:

• • Purchasing a principal residence or an exempt vehicle;
  • Purchasing approved disability related items, education, training expenses or services that are not reimbursable;
  • First and last month’s rent to secure housing; or
  • For any other purpose up to a maximum of $10,000 in a 12-month period.

Concluding Comments

ODSP provides essential income and health supports but carries strict limits regarding assets and income. A properly drafted and administered Henson trust allows funds to be set aside for the benefit of a person with a disability, without impacting their entitlement to ODSP. When used together, ODSP and Henson trusts can provide financial security and flexibility by ensuring that government benefits are preserved while additional resources are available for other uses. Legal advice should be sought when money or property is being gifted to an individual who receives ODSP as it may affect their entitlement to such benefits.