A case overview, by Melodi E. Ulku, Loberg Law, Calgary 28 January 2019
The Supreme Court of Canada’s decision in S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4, released on Friday, is welcome re-affirmation that a beneficiary of a wholly discretionary trust may not have a beneficial interest in the trust property.
At issue was whether the Respondent’s (“MVHC”) policies caught the Appellant’s interest under a trust. As a not-for-profit corporation operating subsidized housing complexes and providing rent subsidies to eligible tenants, it required that tenants wishing to receive rent subsidies must demonstrate eligibility annually by, among other things, having less than $25,000 in assets. The definition of “assets” included “assets in which you have a beneficial interest”.
The Appellant SA, a person with disabilities, had resided in one such complex since 1992 and received rental assistance every year until 2015. The tenancy agreement required that SA provide an income verification statement every year, with which she consistently complied. In 2012 SA’s share of her deceased father’s estate was placed in a “Henson trust” – a special type of trust settled for the benefit of a person with disabilities who relies on publicly funded social assistance benefits – by court order. In 2015 the MVHC demanded information as to the value of the trust, taking the position that the trust assets were an “asset under which you have a beneficial interest” for the purposes of determining her eligibility for continued rent assistance. Upon the Appellant’s refusal the MVHC declined to consider her application and ceased providing assistance.
The central feature of the Henson trust is that the trustee is given ultimate discretion with respect to payments out of the trust such that the beneficiary (a) cannot compel the trustee to make any payments and (b) is prevented from unilaterally collapsing the trust under the rule in Saunders v. Vautier. Since the beneficiary has no enforceable right to receive any property from the trustee unless and until the trustee exercises his or her discretion in a beneficiary’s favour, a beneficiary’s interest is not an “asset” for the purposes of means-tested social assistance programs. Therefore the Henson trust makes it possible to set aside property for the contingent benefit of a person with disabilities in a manner that jeopardizes that person’s entitlement to receive social benefits as little as possible.
The Court thus held that although SA is a co-trustee, by the terms of the trust “she has no independent, concrete right to compel any payments to be made to her for her benefit, and cannot unilaterally terminate the Trust. Her interest in the trust property therefore amounts to a “mere hope” that the trustees will exercise their discretion in a manner favourable to her.” In conclusion, SA’s interest in the trust is not an asset that could disqualify her from consideration for rent subsidy.
We at Loberg Law welcome this most recent pronouncement by the SCC, especially in this current climate where it seems trusts are ever more under siege. As in all cases however, it is important to remember that context is a driving factor in determining “beneficial interest” in trust property. The precise terms and purpose of the trust contrasted against the precise wording and purpose of the source behind the probe can lead to results and decisions much different than the Appellant’s success in this case.
Loberg Law practices in trusts, wills and estates, as well as commercial and estate litigation. Melodi E. Ulku is the head of the firm’s Trusts and Estates Practice Group bringing multi-jurisdictional, offshore experience to the group. Ms. Ulku is a Master’s candidate at the University of London in International Trusts, an Associate of the Society of Trusts and Estates Practitioners (STEP), and has in-depth level understanding of trusts law in Canada, the U.K. and offshore.
Contact Melodi at MUlku@Loberg-Law.com