All About Estates

Supreme Court likely to leave Henson Trusts alone

A month from now, the Supreme Court of Canada will hear a case that may provide some guidance on the issue of what interest a beneficiary of a discretionary trust has in that trust. The high court has granted leave to appeal in the case of S.A. v. Metro Vancouver Housing Corporation. While some have worried that this case may impact Henson-style trusts (discretionary trusts set up to not impact social assistance benefits) it is likely it will be decided on its facts.

The Metro Vancouver Housing Corporation (the “Landlord”) is an entity that provides affordable rental housing in Vancouver.   The Landlord requires prospective tenants to provide evidence of their income and assets. The Landlord also offers a rental subsidy to some tenants: in order to be considered less than $25,000 in assets is required, including beneficial interests. Note that this is a necessary, but not sufficient, criteria – even if a tenant meets the threshold there is no guarantee of a subsidy. The appellant, S.A., is a tenant of the Landlord and recipient of the subsidy (the “Tenant”). She is also a person with a disability. Every year she was required to verify her assets for the subsidy.

When the Tenant’s father passed away he left her a third of the residue of his estate. While the size of the Tenant’s interest is unknown, it can be assumed it was greater than $25,000 as the Tenant went to court to vary her father’s will to place her share of the estate in a discretionary trust.

The Tenant let the Landlord know about her discretionary trust but stated that it was not an asset that would affect the subsidy. She noted she had received nothing from the discretionary trust since its inception. The Landlord stated that it needed this information to come to a determination and as the Tenant would not provide anything, they revoked her subsidy.

The Tenant and the Landlord both went to court for a decision. The lower court judge dismissed the Tenant’s proceeding and granted the relief sought by the Landlord. His Honour found that the Tenant had a beneficial interest in the trust and, as such, had to disclose information on the trust to the Landlord.

The Tenant appealed to the British Columbia Court of Appeal. Disability Alliance BC Society intervened at the appellate level. The Society argued that being a beneficiary of a discretionary trust did not mean that trust was an asset of the beneficiary. Such an outcome could jeopardize Henson trusts (named after the Ontario Court of Appeal decision), fully discretionary trusts which allowed people with disabilities to not be disqualified for social assistance benefits.

The Court of Appeal found that while the Tenant may not have a vested interest in the trust, she clearly some form of beneficial interest. Ultimately, the court found it did not have to opine on how this interest should be valued (or even if it could even be valued): if the Tenant wished to apply for the subsidy she must disclose the amount of the trust. The Landlord would then have to decide how it would take this information into account in determining if the Tenant was eligible for the subsidy.

The Court of Appeal did not believe that the ruling would cast a chilling effect on Henson trusts, as all social assistance programs had their own eligibility criterion.

It is doubtful that the Supreme Court of Canada will want to use this case to jeopardize Henson trusts or to explore the thorny issue of the valuation of interests in discretionary trusts. Clearly, the Tenant was in a different position than a similarly situated individual without a trust. It is possible that the Tenant will never receive anything from the trust (although it appears she is a trustee of this trust). If – after the Tenant discloses the amount of the trust to the Landlord – the Landlord denies her the subsidy, she can always go back to court to argue that her unvested interest should not be counted against her. We will see what happens when the court hears this matter on May 25, 2018.

About Jacob Kaufman
Jacob Kaufman is a lawyer with de VRIES LITIGATION LLP. Jacob assists clients with will challenges, dependant support claims, guardianship applications, power of attorney disputes and other estate and trust litigation matters. He has appeared before various levels of court, including the Superior Court of Justice and the Court of Appeal for Ontario. Jacob obtained his law degree from the University of Western Ontario (with distinction) after completing an Honours Bachelor of Arts degree from Queen’s University in history (with distinction). He has written articles for the International Law Office, Legal Alert and the OBA’s Deadbeat. Email: jkaufman@devrieslitigation.com

2 Comments

  1. Paul Leon

    March 21, 2018 - 3:10 pm
    Reply

    Thank you Mr. Kaufman for your article. However,
    I was not aware that a trustee could apply to a court to vary a Will to the extent of creating a discretionary trust. Shamefully, I did not read that case but your comments would be appreciated.

    • Jacob Kaufman

      March 21, 2018 - 8:59 pm
      Reply

      The variation of the will at issue was done pursuant to British Columbia’s (now-defunct) Wills Variation Act (that Act has now been replaced with the Wills, Estates and Succession Act). I don’t practice in BC, but my general impression is that the statute confers substantial powers to vary and amend wills.

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