The primary residence is often the most significant asset a parent can leave behind, but it’s also the most legally complex especially when the child is disabled. Because every situation is unique, deciding the ideal plan requires careful consideration of long term needs of the beneficiary, tax implications, and provincial benefit rules.
Shared ownership (joint tenancy with right of survivorship)
Using joint tenancy with right of survivorship, the parent would add the child to the deed of the house while that parent is still alive. Upon the parent’s death, the property passes automatically to the surviving owner without going through the probate process and bypassing the 1.5% estate administration tax in Ontario.
The risk is that the child becomes a legal owner immediately. If the child has a disability, this could immediately impact asset limits with respect to provincial disability supports unless the ownership is structured as a bare trust where the child has no beneficial interest until the parent passes. Secondly, once a child is on the title the parent can no longer sell or take debts from the equity in home without the child’s consent. Lastly, if the child is sued, goes through a divorce, or has any other financial implications, creditors can place a lien on the home as it is a legal asset in their name. The parent could find themselves in a situation where they are unable to sell or move because of a child’s outstanding debt.
The principal residence exemption problem
In Canada, capital gains tax is not applicable when the primary residence is sold. However, if a child who does not live in that home is added to the title, the home may lose a portion of that tax free status. If 50% of the home is now legally owned by a child living elsewhere, that 50% becomes investment property in the eyes of the CRA (unless the joint tenancy was structured as a trust). If and when the house does sell, there may be unexpected tax bill on the child’s share of the appreciation.
Direct inheritance via the will
Gifting the house in the will may be suitable when the disabled beneficiary is mentally capable of managing property. This option is only viable when the beneficiary possesses both the legal capacity to enter a contract and the ability to manage the finances of owning a home. The child would be solely responsible for paying property taxes, home insurance, utility bills, and repairs to upkeep the property.
Using a Henson Trust
A Henson Trust is an essential tool for protecting a primary residence in Ontario. A Henson Trust provides several advantages as an alternative to direct ownership of the house. By transferring a home into this type of trust, a disabled child can live in the property indefinitely without its value counting against provincial disability support asset limits.
The crux of a Henson Trust lies in its absolute discretion; And because the trustees have total control over the assets and the beneficiary has no legal right to demand funds, the government does not consider the house the child’s property.
Testamentary (Death) Henson Trust vs Inter Vivos (Living) Henson Trust
A Testamentary Henson Trust is written directly into the will and doesn’t exist until the person passes away. Because the house is part of the estate and is being moved into trust based on instructions in the will, the will must be probated before the executor has the legal authority to transfer the title to the trustees. This is the more common type of Henson Trust as if designated as a Qualified Disability Trust (QDT) is more tax advantageous because it uses graduated tax rates.
An Inter Vivos (Living) Henson Trust is created while still alive. The house would be gifted to the trust immediately. Since the trust already owns the house upon death, the property is not considered part of the estate of the deceased and bypasses the probate process, and saves the 1.5% estate tax. This is the less common route as there are tax disadvantages (highest marginal tax rate) and the administrative complexity of filing annual T3 tax returns can be costly.
The gift over clause
A Henson trust typically includes a gift over clause which specifies who will inherit the home once the beneficiary passes away. If the trust document fails to specify a secondary or residual beneficiary, the law considers the property to have vested in the child, meaning:
- The Henson Trust could be ruled invalid, which,
- would disqualify the child from provincial disability supports such as ODSP if the house is a non exempt asset. While the primary residence is considered an exempt asset, exempt status is only applicable when the child resides there, which can be problematic if they live somewhere else such as a group home. And,
- the home would be put into the child’s estate when they pass on.
Home maintenance is expensive
ODSP’s shelter allowance is capped at $611 per month, and a $1,436 total maximum monthly income support for a single person as of July 1st, 2026. This amount is not enough to pay for property taxes, insurance, hydro; Not to mention the costs of maintaining the house. Outside of a Henson Trust, any financial help (gifts) the child receives to pay for home expenses is subject to ODSP’s limit of up to $10,000 in gifts annually, and any excess counts as income and will potentially reduce their support payments. Unfortunately, the high costs of home ownership can quickly exhaust this limit. A Henson Trust can pay for some expenses directly without affecting the child’s provincial disability supports because the money is coming from a discretionary trust and is not considered a gift to the beneficiary. Note that payments made directly for principal residence expenses (like property taxes, home insurance, utilities, or maintenance) are actually fully exempt from the $10,000 gift limit. However, if the Trust does pay for utilities or property taxes, then ODSP will reduce the shelter allowance portion of the child’s monthly cheque (up to the $611 maximum as of July 2026)
Protection from assets outside the trust
If the disabled child needs to move into a more accessible home or specialized care facility, they will likely need to sell the house to finance the move. If the child owns the home directly, they could have the proceed of the sale in their bank account potentially putting them over the $40,000 ODSP asset limit for single persons. In contrast, if the Trust owns the home, the sale happens inside the trust. The cash remains a discretionary asset, and the trust can use the money to pay for a more accessible house or higher quality health care without jeopardizing the child’s ODSP supports.
Avoiding the Public Guardian and Trustee (PGT)
If a child lacks contractual capacity, a family member could apply to the courts for guardianship. And if no family member is willing or able, the Public Guardian and Trustee (PGT) may be forced to step in to manage the property as a last resort for an adult deemed mentally incapable. For this service there is a 3% income and disbursement fee (which is applicable on every bill payment to pertaining to the house), and 0.60% of the annual value of managed assets. Within a Henson Trust, the appointed trustee or trustees would better understand the child’s lifestyle wants and needs without the costly fees or bureaucracy of government management.
Choosing how to pass on a family home is a balance between saving on taxes today and ensuring the disabled child’s security tomorrow. While joint tenancy may save on probate fees, the Henson Trust remains the ideal solution for most families because it protects the child from losing their provincial disability supports, protects against creditors, and safeguards assets to help pay the high costs of home maintenance.