Testamentary Trusts and Planning for Loved Ones Who Receive AISH

By Shelly Chamaschuk and Bethany Schatz

Albertans wanting to plan for disabled family members have had a number of barriers to overcome and limited choices on how to provide for these family members without creating other financial hardships. Two recent developments in the area of trusts law afford more options when planning for the future financial needs of loved ones with disabilities.

If you have set up a trust as part of your estate, it is important to ensure that it best reflects the current state of the law. In some cases, the recent developments we discuss below may require updates to your estate planning documents.

The first development is the Supreme Court of Canada’s decision in SA v Metro Vancouver Housing Corp released on January 25, 2019. The SCC decided that a Henson trust, which is commonly set up for disabled beneficiaries, was not an “asset” for the purposes of determining a disabled woman’s eligibility for rental assistance. Ultimately, the key to the SCC’s decision was its characterization of a Henson trust. In this type of trust the trustee is given exclusive discretion regarding payments from the trust such that the beneficiary is unable to compel the trustee to make payments to him or her, and the beneficiary cannot unilaterally collapse the trust (also called a “discretionary trust”). In other words, the beneficiary has no control over if or when he/she will receive any of the funds held in the trust. As such, a Henson trust does not fall within the ordinary meaning of an “asset” because it is not property that a person can actually access and use to pay their debts and liabilities. Instead, these types of trusts only provide the beneficiary with a mere hope of receiving some or all of the property in the trust at some point in the future.

This decision offers Canadians more confidence to plan for the financial future of loved ones with disabilities without fear of negatively impacting the disabled person’s eligibility under social assistance programs. However, the SCC did not say that a Henson trust will never be treated as an “asset”; it will depend on the rules and regulations that govern eligibility requirements for each program.

The second development is Alberta-specific and relates to recent amendments to the Assured Income for the Severely Handicapped Act that were passed in the summer of 2018. Interestingly, the amendments effectively make the SCC’s decision in SA v Metro a moot point, at least when it comes to eligibility for AISH.

To be eligible for AISH an applicant must meet certain financial criteria, among other factors. This includes a requirement that the applicant and their cohabiting partner must not have assets in excess of $100,000. Effective April 1, 2018, the amendments provide that a trust is an exempt asset such that the value of the trust will not count toward the $100,000. There is no restriction on the type of trust that will be exempt, whether discretionary or non-discretionary, and there is also no limit on the amount of the trust. In addition, the amendments provide a one-year grace period to allow the AISH recipient time to move an inheritance or lump sum payment into a trust or other exempt asset.

That being said, AISH eligibility also requires that the income of an applicant and their cohabiting partner must not exceed a maximum amount set out in the AISH Act. So, while the amendments make a trust an exempt asset, income from that trust could still negatively impact a person’s eligibility for AISH.

If you have questions or would like advice, reach out to our Wills, Estates and Trusts team.

This post is meant to provide information regarding the administration of an estate and is not intended to provide legal or tax advice. You should consult a lawyer. Although every effort has been made to provide current and accurate information, changes to the law applicable to estate administration may cause the information in this post to be outdated.