S.A. v Metro Vancouver Housing Corp : “Henson Trusts” in the Context of Rent Subsidies

The Supreme Court of Canada (“SCC”) addressed the issue of “Henson trusts” for the first time ever this January in S.A. v Metro Vancouver Housing Corp, 2019 SCC 4 [Metro Vancouver]. A Henson trust (named after the decision in Ontario (Director of Income Maintenance, Minister of Community & Social Services) v. Henson,  1987 CarswellOnt 654, [1987] O.J. No. 1121) is an absolute discretionary trust that can be bequeathed to a person with disabilities. They are designed to not jeopardize that person’s entitlement to social benefits, such as disability payments.

The SCC’s decision provides nation-wide guidance about the nature of Henson trusts, directing that these trusts should not be considered “assets” for the purpose of rental subsidy applications. Prior to the SCC’s judgment, the jurisprudence on Henson trusts had been quite bare. In fact, the brief headnote of the originating case runs roughly as long as the full decision. Metro Vancouver provides some clarity and confidence to testators that the resources they leave in a Henson trust will not cancel out the beneficiary’s eligibility for social assistance, including rental subsidies. Such a development will make the financial future of many Canadians with disabilities more secure.

Background

S.A. is a person with disabilities who cannot work and for whom disability benefits are the only source of guaranteed income. For over 25 years, she resided in housing operated by the respondent, the Metro Vancouver Housing Corporation (“MVHC”). Each year, S.A. was responsible for providing MVHC with an income verification statement for the purpose of confirming that she meets their financial eligibility criteria for rental assistance. Until recently, she always received this additional assistance. In 2012, following the death of her father, she was given a Henson trust. As set out in the trust’s terms, the trustees were given the power to provide S.A. with disbursements when they unanimously deemed it “necessary or advisable for the care, maintenance, education, or benefit” of S.A. (Metro Vancouver, para 14). This means that, although S.A. is a named beneficiary of the trust (and in fact a co-trustee with her sister), she cannot compel payments from the trust. She also cannot unilaterally collapse the trust “under the rule in Saunders v. Vautier, according to which a beneficiary of a trust (or multiple beneficiaries acting jointly) can terminate the trust and demand that the trustee convey legal title over the corpus of the trust to him or her” (Metro Vancouver, para 38).

S.A. disclosed to MVHC that she was the beneficiary of a Henson trust. MVHC requested details about its value, claiming this was relevant to her eligibility. S.A. disagreed about the relevance and refused to disclose. Consequently, in 2015 MVHC terminated S.A.’s subsidy and S.A. has since been paying full rent under protest. In July 2015, S.A. commenced proceedings against MVHC on the grounds of contract breach. She contended that her interest in the Henson trust was not an “asset” within the ordinary or implied meaning of the word as it pertains to the Assistance Application. Thus, she argued that MVHC had no right to demand information about the value of the trust or refuse to consider her 2015 subsidy application when she did not provide this information.

The Nature and Purpose of Henson Trusts

Statistically, individuals with disabilities are disproportionately poor and unemployed and yet often have expenses that exceed those of the average Canadian (i.e.  personal aids and devices, and prescription medications).[1] Traditionally, any inheritance left in trust to a person with disabilities was considered an asset – as most trusts are – which could have the collateral effect of disqualifying the beneficiary from government benefits. It was as though one hand would give, while the other took away. This was hardly a recipe for realizing the wishes of testators, or, for that matter, addressing the systemic wealth inequality faced by Canadians with disabilities.

A solution was found in the absolute discretion of the Henson trust, which places estate assets fully in the care and control of a trustee, thereby avoiding the collateral consequence of benefits cancellation. Justice Himel of the Ontario Superior Court of Justice in Stoor v Stoor Estate, 2014 ONSC 5684 [Stoor], wrote:

The Henson trust, properly constituted, allows the beneficiary to retain entitlement to government benefits, while simultaneously deriving funds from the trust, at the trustee’s discretion. The trust funds do not interfere with beneficiary’s qualification for government benefits because no interest in the trust funds vests in the beneficiary (Stoor, para 7). 

For these reasons, a Henson trust can be construed as a “mere hope” of receiving a benefit (Metro Vancouver, para 49).

Judicial History

The key question before the courts was whether S.A.’s interest in the Henson trust fell within the meaning of the word “asset(s)” as used in MVHC’s Assistance Application for subsidized housing. The Chambers Judge dismissed S.A.’s petition, interpreting the word “asset” broadly to include S.A.’s contingent interest in the Henson trust.

The British Columbia Court of Appeal (“BCCA”) also dismissed S.A.’s appeal (in S.A. v Metro Vancouver Housing Corporation, 2017 BCCA 2 [BCCA Metro Vancouver]). According to Justice Goepel, writing for the panel, S.A. “clearly has a beneficial interest” in the trust, and implying that it is an “asset” that “she must disclose” if she wants to be considered for a rental subsidy (BCCA Metro Vancouver, para 54). Justice Goepel also highlighted that MVHC has limited funds for additional rent assistance, concluding that a Henson trust could be a relevant factor in determining how to assign subsidy dollars; the trusts “provide some individuals with benefits unavailable to others” (BCCA Metro Vancouver, para 47).

Guidance on Henson Trusts from the SCC

The Majority of the SCC overturned the decision of the BCCA, allowing S.A.’s appeal. The SCC determined that the dispute between the parties was contractual in nature and declared that MVHC had an obligation to consider S.A.’s rent subsidy application without treating the Henson trust as an “asset.” No monetary award was given to S.A. by the SCC, but the matter was remitted to the British Columbia Supreme Court for damages. Justice Côté wrote:

“a reasonable person who interpreted the Assistance Application objectively and without reference to the Asset Ceiling Policy would understand the word “assets” to mean an applicant’s property or interest(s) in property that can actually be used to discharge his or her debts and liabilities, including the monthly rent that the applicant owes to MVHC. Given the purpose of the Rental Assistance Program, there is no reason why MVHC would concern itself with a financial resource – like a contingent interest in a trust – that an applicant cannot use in order to pay his or her monthly rent” (Metro Vancouver, para 48).

The BCCA had focused on a clause in one of MVHC’s policies that defined assets as including, inter alia, “assets in which you have a beneficial interest.” The list also included items like mutual funds, stocks, cash, luxury vehicles, and business equity (Metro Vancouver, para 9). Henson trusts are not specifically listed, and the SCC determined that to imply their inclusion through the catch-all “assets in which you have a beneficial interest” clause is unreasonable. A Henson trust is of a completely different nature than the other items in the list.

Importantly, the SCC made clear that their ruling does not mean Henson trusts can never be treated as an “asset.” The SCC concurred with the BCCA’s observation that “[w]hether benefits from a discretionary trust must be taken into account will vary from program to program and depend upon the rules and regulations that govern eligibility for any particular program” (Metro Vancouver, para 55). This leaves the door open to legislators to draft or amend legislation that would explicitly consider Henson trusts as an asset in evaluating eligibility for social programming. However, the trend may possibly be going in the opposite direction. Preceding the SCC’s ruling, in June 2018 the Alberta legislature amended disability legislation that had formerly treated an interest in a discretionary trust as an asset (Bill 5 amended the Assured Income for the Severely Handicapped Act, SA 2006, c. A-45.1, s. 2 [AISH]). Now, Henson trusts are excluded from asset calculations for disability benefits in Alberta.

The Partial Dissent

The partial dissent, written by Justice Rowe with Justice Brown concurring, accepts the majority’s analysis on the nature and purpose of Henson trusts. It expresses discomfort, however, with how the majority opinion seems to negate the discretion of the MVHC, substituting it with the SCC’s view. As Justice Rowe states, “MVHC, within the bounds of its agreements with BC Housing and applicable human rights legislation, is free to pursue its mandate as it sees fit” (Metro Vancouver, para 87). Ultimately, Justice Rowe argues that this matter of public policy would be best decided by the legislature rather than by the SCC, a classic division of powers argument.

Concluding Remarks

From the respondent’s perspective, the SCC’s decision must have been a surprise. Two British Columbia courts had already agreed with their framing of the case. The case involved a non-provincial actor distributing a limited discretionary benefit (the rent subsidy), to which there is arguably no legislative entitlement. Further, MVHC is an institution with understandably limited resources. MVHC argued that in the universe of people who need access to rent subsidies, it is not wrong for people who have been gifted trust funds to be assessed differently.

However, the SCC’s decision is well-reasoned. Conceptually, it does not make sense to construe a “mere hope of benefit” as a “privilege” that bears any relevance to rent subsidy eligibility. A Henson trust could privilege a person over other candidates for subsidies, but due to the contingency of that person’s interest in it there is no certainty of this. The SCC may also have been mindful of the decision’s wider impact. If the BCCA ruling were upheld, it would have complicated the Henson trust regime, not only in the rent subsidy context but likely more broadly. Other providers of means-tested benefits might have wondered whether they should also treat a Henson trust as an asset. Some legislation clearly prohibits this (see ODSPA[2] and AISH), but others (like MVHC’s rental subsidies policy) do not. Accordingly, such uncertainty may have dissuaded families from using a Henson trust at all as a way of leaving resources for their family members with special needs. Alternative, more precarious strategies may have become more frequent, such as simply leaving the money to a different relative with the hope that it would be used for the care of the disabled family member and not be squandered.

A particularly interesting feature of the SCC’s analysis should be underscored. The SCC had to determine what to do about S.A.’s status as a co-trustee in her Henson trust. Clearly, while Henson trusts can play an important, niche function, there is generally a disempowering element for the beneficiary. The beneficiary has no ownership or control. However, as a co-trustee, S.A. at least has some formal input and can affect how payments are made if she and her co-trustee (her sister) both agree. Because the SCC held that being a co-trustee does not affect the discretionary nature of the trust,  this arrangement is now available to other families who want the beneficiary to, paradoxically, retain some say over an absolute discretionary trust.

[1] Stuart Morris, Gail Fawcett, Laurent Brisebois, and Jeffrey Hughes, “A demographic, employment and income profile of Canadians with disabilities aged 15 years and over, 2017” (November 2018), Statistics Canada, online: <https://www150.statcan.gc.ca/n1/pub/89-654-x/89-654-x2018002-eng.htm>.

[2] Ontario Disability Support Program, “Funds Held in Trust” (Sept 2017), online: <https://www.mcss.gov.on.ca/en/mcss/programs/social/directives/odsp/is/4_7_ODSP_ISDirectives.aspx>.