Looking back, I'm thinking that the wording of this post, in particular, might have caused some confusion. Which is unfortunate because what I was trying to say, what I meant to say, was what I think I had clearly set out in a previous post.
Now, don't be fooled by the first line; you actually have to read the whole thing.
Discretionary trusts will not protect your child's access to government benefits.You can read the rest of that post here.
A discretionary trust is a type of trust where the Trustee is given discretion as to what types of investments to invest in and as to whether and when to distribute money to the beneficiaries. This type of trust is fairly common in a Will where one of the beneficiaries is a minor. Even though with this type of trust, the Trustee has the discretion to decide whether or not to distribute money to the beneficiary, this won't be sufficient for our purposes. Because with a discretionary trust, the beneficiary (your child, in this case) would still have the legal right to go to court and have the Trustee's exercise of discretion analyzed to ensure that it has been exercised reasonably. And if the court find that the Trustee has acted unreasonably, it can compel him to pay benefits to the beneficiary.
You will recall , however, that the Henson Trust is an absolute discretionary trust, meaning that the Trustee cannot be compelled (forced) to disburse money for the support of the beneficiary. In other words, your child, as the beneficiary of such a trust, will have absolutely no legal right to go to court and force the Trustee to provide any money to her. Theoretically, the Trustee could decide to never disburse any money from the trust and there would be nothing that anyone could do about it. But that is the crux of the matter, the good and the bad. That lack of control by your child is what is required to protect their access to government benefits. And also, incidentally, why you will want to choose your Trustee with great care. You are giving them a lot of power over your child's life.
So why is the Department taking the view that Henson Trusts are not valid in Nova Scotia and we are telling you otherwise?
The relevant point here is that although an ordinary discretionary trust will not be sufficient to protect a person's access to government benefits, I am reasonably confident that a Henson Trust will.
And that's not just my opinion; I have discussed this matter with both Ken Pope and Paul Miller, each of whom practice extensively in this area of the law, and although the matter has never been taken to court in Nova Scotia, we are all in agreement that if it was, it should be found valid.
So, I hope that's clear.
When it comes to protecting government benefits in Nova Scotia:
- Ordinary, garden-variety discretionary trust - Bad.
- Henson Trust - Good.