Canada: Did A Recent Court Of Appeal Decision ‘Water Down' Discretionary Trusts?

A discretionary trust is an important estate planning tool for many purposes.  One purpose is to protect an inheritance for a person with a disability, and to ensure the continuing availability of social assistance for that person.  The Court of Appeal recently considered a discretionary trust in the context of an applicant for rental assistance (SA v. MVHC 2017 BCCA 2).

A lower court decision had found that applicant, who was also a beneficiary of a discretionary trust, was required to provide the "value of the discretionary trust" in her application to be eligible for rental assistance.  However, discretionary trusts usually don't affect eligibility because they don't have a 'value' for a beneficiary.

Our firm acted at the Court of Appeal for a leading advocacy society for persons with disabilities to provide perspective about these trusts. The Court agreed that a beneficiary's interest in a discretionary trust does not have value, and that such trusts are important to protect independence and full citizenship.  However, the Court referred to difficult public policy choices and also found that the rental assistance program is different from other assistance programs.  Rental assistance is not available for all eligible applicants. Rather, limited funds require a selection among eligible applicants.  In that context, even though a trust interest has no value, the potential benefit of a trust may be considered when selecting between applicants.

Helpfully, this decision confirms the existing law about discretionary trusts and their importance.  It also confirms that trusts will not affect social programs that provide assistance for all eligible applicants.   However, it will have serious implications for: persons with disabilities who rely upon rental assistance, family members who would like support those persons, and housing providers who must evaluate their applications.

There are strategies that can assist these persons.  For more information see the the full article.

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