Funding the Henson Trust
If you have gone through the time, put in the effort and made the financial investment to set up a Henson Trust in your wills, you want to make sure that it can be used to benefit your loved ones. That means you need to have money available for the Henson Trust. This money in the Henson Trust is used to provide the quality of life for your loved one. The majority of times, the Henson trust is not created until the parents or caregivers have passed away, it is formed from the wills. That means you cannot today go to the bank and set up a bank account for the Henson Trust, but we always get asked the same great question; how do I put away money today for my loved one. How can I save for the Henson Trust
Meet the Burks. John is 47, Jane is 45, and their daughter Julie is 19. Julie is lives with them and is receiving ODSP. Julie receives $896 a month from ODSP for living in a room and board arrangement with her parents. As recommend by ODSP the Burks are taking $500 a month from Julie’s ODSP for her room and board. John and Jane want to use some of this money each month to save for Julie’s future to ensure that when they are gone, her qualify of life continues. How can they do this?
John and Jane can open an investment account and deposit $200 a month to set aside for Julie. They can do this each month, growing it conservatively and hope by the time they pass away, there is enough in the account for Julie. There are several risks associated with this plan that we cannot control. We do not know how long the Burk will be able to save for. What if something happens tomorrow and they have not had time to build up the savings. We do not know how the investment will grow. The Burks find it hard to plan for Julie’s future when they do not know what their future savings will be worth. We also do not know what may happen to their estate when they pass away, could there be more owing in taxes and debts that takes away from this money. Saving $200 a month is a plan but it has a lot of risks and worries the Burks.
We show John and Jane a second option and a way to guarantee money for Julie’s Henson Trust. Using the same $200 a month, they set up Bright Futures plan and instead use that money to acquire a joint life policy. They invest the same $200 a month but it goes into the insurance savings plan. Based on their age and budget that $200 allows them to acquire $330,000 of coverage. From day one when the first $200 is deposited, the Burks have $330,000 guaranteed for Julie’s Henson Trust. This gives them peace of mind in planning and removes all of the risk associated with option 1.
The Burks wonder if option 2 using the Bright Futures insurance plan will provide more for Julie’s future. Let’s compare the two options below on this graph. We show the Burks how much money they will save (green), how much their investment growing at a safe 3% a year (yellow) will be worth and the Bright Futures option (blue).
After year one, the Burks have saved $2,400 and through the investment option they only have $2,427 for Julie. With the Bright Futures option they have $330,000 guaranteed after year 1 and have only saved in $2,400. By age 65, they have only saved in $48,000, and if invested, it would only grow to $82,825. The Bright Futures options is still guaranteed to provide more at $330,000. If Jane is living at age 95 (50 years after starting the savings), the investment option would provide Julie with $217,996. The Bright Futures savings plan is providing $330,000. That is $112,004 more then the savings. Plus to have this guaranteed $330,000 even if the Burks live to age 95 they have only saved in $120,000. Giving 175% more then they saved.
The advantages of the Bright Futures Saving Plan
- From the day the first $200 is saved, $330,000 is guaranteed.
- Even at age 95 (50 years after starting) the Bright Futures saving plan has more money for Julie then the savings alone.
- The Bright Futures Savings plan gives the Burks a guaranteed amount of money, that gives them peace of mind and a guaranteed number to plan for Julie with.
- The insurance money pays out tax-free.
- It is paid directly the Henson Trust within 31 days for Julie’s immediate usage.
- This results in reduced work for the trustee and a significantly shorter wait time for Julie to have money available for her.
How Does It All Work
- John and Jane set up their plan using Bright Futures insurance policy. They pay $200 a month and never have to think of the savings plan again. The price will never increase, and from day one they have $330,000 for the Henson Trust
- They name the Henson Trust as the beneficiary of the policy. When they pass away, the insurance company pays a cheque to the Henson trust within 31 days, and funds are available for their daughter Julie.
- The pool of money in the Henson trust can and should be invested to continue to grow. They contact Derrick Lee-Shanock the investment advisor on our team to manage this for the trustees.
- The trustee access money as they require it to provide for their Julie.
- When Julie passes away, there is a final beneficiary of the Henson trust the parents set up. They will receive anything additional in the Henson trust at that time.
This was just an example to show you numbers. We understand everyone’s situation is different, and we can work with you on a plan based on your needs. If you want to see how this could work for you please book a call with us or click her to input your information for (QUOTE*)