Last spring, PooranLaw represented two intervenors, the Canadian Association for Community Living (“CACL”) and People First of Canada (“PFC”) in the Supreme Court of Canada (“SCC”) appeal in S.A. v. Metro Vancouver Housing Corp. After much anticipation, the Supreme Court released its decision today, and found that the appellant’s Henson trust did not disentitle her from receiving a rental housing subsidy through a social assistance program administered by the respondent.
This case deals with the important issue of the eligibility for social assistance programs of people who are also beneficiaries of absolute discretionary Henson trusts. It is a significant decision both for current social assistance recipients who are also Henson trust beneficiaries, as well as for the family members of people with a disability who have created, or are considering the creation of a Henson trust in their will.
Background
This case concerned a person with disabilities, referred to in the decision only by her initials, S.A., who was the beneficiary of an absolute discretionary Henson trust. Since 1992, S.A. had resided in an apartment operated by the respondent Metro Vancouver Housing Corp. (“MVHC”). In 2012, she became the beneficiary of a Henson trust following the death of her father. The terms of the trust provided that the trustees had the discretion to pay to S.A. income from the trust as they “decide is necessary or advisable for the care, maintenance, education, or benefit” of S.A. This meant that although S.A. was a named beneficiary of the trust, she could not compel payments from the trust, and would only receive such payments at the discretion of the trustees.
Absolute discretionary trusts, commonly referred to as Henson trusts (in reference to a 1989 Ontario Divisional Court decision which found that these trusts were exempt as assets for the purpose of calculating entitlement to government disability benefits) are a commonly used tool by families of people with disabilities to ensure that their loved one has a measure of financial security and autonomy after the testator’s death. By providing a family member with a disability an inheritance by way of a Henson trust, that individual’s ability to receive social assistance benefits, such as government disability benefits and housing supports, is preserved, while the Henson trust provides them with a measure of financial security to enhance their quality of life and to support their disability-related needs.
Following the Henson decision, the majority of means-tested social assistance programs in Canada have considered assets held in a Henson trust to be exempt as “assets” for the purpose of determining whether an individual is eligible to receive benefits. This is because while a person receiving social assistance may be named as a beneficiary of a Henson trust, they have no ability to compel the trustee to provide them with funds from the trust; as such, the beneficiary of a Henson trust cannot rely on the funds in the trust to support their day to day needs.
However, this was not the case for S.A. with respect to the housing assistance benefits that she received from MVHC. These benefits are provided on a discretionary basis by MVHC to low income individuals. As a person whose source of income was provincial disability benefits, S.A. had qualified for rental assistance through MVHC, which provided her with a subsidy to cover approximately two-thirds of her monthly rent. In 2015, her rental assistance was discontinued by MVHC on the basis that her Henson trust was an asset whose value required disclosure to MVHC.
S.A. challenged this decision and was initially unsuccessful in her petition to the Supreme Court of British Columbia and in a subsequent appeal to the British Columbia Court of Appeal. She then appealed to the SCC.
The Supreme Court’s Decision
The majority decision of the SCC was written by Justice Côté, who allowed the appeal and found that S.A.’s Henson trust was not an asset to be considered when determining her eligibility for rental assistance under the MVHC guidelines. Justices Rowe and Brown dissented in part, but agreed with the majority’s important analysis regarding Henson trusts.
The SCC found that the dispute between the parties was “fundamentally contractual in nature” based on the terms of the tenancy agreement between S.A. and MVHC. While S.A. did not have a contractual entitlement to receive the rental assistance, the Court found that MVHC did have a contractual obligation to consider whether her rent would be adjusted under the terms of the rental assistance program. This finding is significant because it means that S.A. was entitled to seek a declaration from the courts regarding the issue of her Henson trust.
After addressing this preliminary issue, the Court then moved on to an analysis of whether S.A.’s interest in the Henson trust formed part of her assets for the purpose of determining her eligibility for MVHC’s rental assistance program. In reviewing the trust language, the SCC determined that S.A’s trust did constitute a valid Henson trust. As such, S.A. had “no enforceable right to receive any of the Trust’s income or capital.”
This then gave rise to an analysis regarding the correct definition of the term “asset,” as used in the MVHC’s guidelines (as the rental assistance application document did not provide a definition of the term upon which applicants could rely). The Court made it clear that this analysis related specifically to “assets” as they are used to determine eligibility for the MVHC program, and not the term “asset” generally. In this particular context, the Court provided a plain-language definition for “asset,” finding that an asset, for the purpose of determining MVHC rental assistance eligibility, was “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.”
On this basis, namely that S.A. could not enforce a right to receive funds from the Henson trust, and that an asset for the purpose of program eligibility was limited to something that “can actually be used” to discharge a debt such as their monthly rent, the Court concluded that S.A.’s Henson trust did not fall within the meaning of asset for the purpose of determining eligibility for the MVHC program. As such, S.A. also did not have a legal obligation to provide MVHC with details of the value of the Henson trust. In its analysis, the Court relied heavily on the reasoning from Henson, noting the similarities both between the trust in Henson and S.A.’s trust as well as between the definition of assets in the benefits program in the Henson case and the MVHC asset definition.
Justice Côté cautions that while in this particular case, S.A.’s Henson trust was not an asset, the determination of whether a Henson trust can be found to be an asset in other scenarios remains a fact-specific inquiry. The Court advises that “the eligibility criteria associated with any social assistance program must be analyzed on their own terms to determine whether and, if so, how an interest in a Henson trust factors into any applicable means test.”
The Court then turned its attention to the question of an appropriate remedy. Justice Côté concluded that it would be appropriate to grant declaratory relief to S.A. Thus, the Court stated that “I would declare that S.A. has a right to have her application for a rent subsidy considered by MVHC in accordance with the terms of the Assistance Application, and that her interest in the Trust is not an “asset” for the purpose of such a determination.” This means that for all future applications to the rental assistance programs, MVHC cannot consider the value of S.A.’s Henson trust, nor can they require her to provide information about the value of the trust.
In her application, S.A. also sought an order requiring MVHC to refund her an amount equal to the value of the lost rental subsidy. The Court reviewed this issue and determined that it did not have sufficient information to make a determination on a potential monetary remedy and therefore remitted this issue back to the British Columbia Supreme Court for determination.
Comments
This is a significant and important decision for the disability community in Canada. While the status of a Henson trust as an asset for the purpose of receipt of means-tested social assistance benefits has been upheld by lower courts and has been accepted in practice by most social assistance programs, this issue had never been addressed by the Supreme Court of Canada. We now have a clear legal analysis from the SCC relating to the purpose and character of a Henson trust, and how such trusts should be treated under a plain language definition of the term “asset.”
While we are pleased with the results of this decision, as it does affirm the viability of a Henson trust as a valid estate planning tool for families of people with disabilities who receive social assistance, we would caution readers against interpreting this decision as a general acceptance that all Henson trusts are always exempt from all means tested social assistance programs. Justice Côté makes this abundantly clear that this decision addresses the concept of an “asset” in the context of the MVHC program, and not in the abstract.
Nonetheless, based on the general definition of the term “asset” used in the Court’s analysis, and the subsequent finding that S.A.’s Henson trust was not an asset within that definition, we believe that it would likely be necessary for a social assistance program to craft eligibility criteria which speak to the Court’s analysis on Henson trusts if they wish to exclude applicants who are beneficiaries of such a trust. At this time, we are not aware of any means-tested social assistance programs that have such eligibility criteria, and we suspect that should a program devise such criteria, it would likely face another legal challenge.
Therefore, we are confident at this time that the families of people with disabilities can continue to rely on properly drafted Henson trusts to provide financial security for their loved ones without putting their entitlement to important government benefits at risk.
