A simple will divides property among beneficiaries and hands it over outright. That is fine for many families. But where beneficiaries are young, vulnerable, or receiving means-tested benefits, or where a second marriage has to balance a new spouse against children from a first relationship, handing assets over outright can defeat the very intentions the will is meant to protect. The tools that solve these problems are testamentary trusts and a small set of related techniques — Henson trusts, life estates, conditional gifts, and mutual wills agreements. This guide explains what each one does and when it earns its place in a plan.
Testamentary trusts: the workhorse
A testamentary trust is a trust created by a will that comes into existence on the testator's death. Instead of a beneficiary receiving property directly, a trustee holds and manages it for that beneficiary under terms the testator set out. Testamentary trusts come in two broad forms: discretionary trusts, where the trustee decides the timing and amount of distributions based on the beneficiary's changing needs, and fixed trusts, where distributions follow explicit instructions with no discretion.
The discretionary form is the more flexible. Consider a widowed parent who wants to provide for three minor children but is rightly worried about handing teenagers a large sum. A discretionary testamentary trust can direct the trustee to pay for the children's education, health, and maintenance until each reaches a chosen age — 25 is a common choice — with the remaining capital passing outright at that age. The structure does two things at once: it provides for the children throughout their youth, and it shields the inheritance from being squandered before they are mature enough to manage it. As a side benefit, assets held in a properly structured trust are harder for a beneficiary's creditors or a beneficiary's ex-spouse to reach than assets handed over directly.
Staggered distributions
A trust can also release an inheritance in stages rather than all at once. A testamentary trust might pay a beneficiary a portion at 25, another portion at 30, and the balance at 35, or tie releases to milestones such as finishing school. For a beneficiary prone to impulsive spending, staggering distributions across years and life events helps them grow into managing significant money rather than receiving it all at the most financially inexperienced point in their life.
Henson trusts: protecting a disabled beneficiary's benefits
A Henson trust is a specific and important tool where a beneficiary has a disability and receives, or may receive, means-tested government assistance. The problem it solves is blunt: if a disabled person inherits money outright, the inheritance can disqualify them from the benefits they rely on, and the inheritance is then partly consumed replacing benefits they would otherwise have received for free.
A Henson trust is structured so the trustee has absolute discretion over whether and when to distribute, which means the beneficiary has no fixed entitlement the benefits authority can count as their asset. The trustee can use the trust to fund supplemental needs — items and services the government program does not cover — without the funds being treated as the beneficiary's own resources and without jeopardizing eligibility. Because the rules governing disability benefits and the recognition of Henson trusts vary by province, this is an area where the trust has to be drafted against the specific provincial program. Omitting a Henson trust where one is needed is one of the more costly and avoidable estate-planning mistakes for families with a disabled member.
Life estates in blended families
A life estate gives one person — the life tenant — the right to use property for their lifetime, after which the property passes to other beneficiaries named by the testator. In blended families it is a graceful answer to a genuine conflict. Suppose someone remarries later in life and owns the family home, and wants their new spouse to be secure but ultimately wants the home to go to the children of a first marriage. A life estate lets the surviving spouse live in the home for life, with the property passing to the children afterward. The new spouse gets stability; the children's inheritance is preserved. The technique balances competing claims that a simple outright gift cannot.
Mutual wills agreements
Blended families face a particular risk that ordinary wills do not solve. Imagine a couple in a second marriage where one spouse owns the home in their name alone and names the other spouse as beneficiary, trusting that the survivor will eventually pass the home to the first spouse's children. The problem is that once the first spouse dies and the survivor owns the home outright, the survivor is legally free to change their own will and leave the home to anyone — including their own children, disinheriting the first spouse's children entirely.
A mutual wills agreement closes that gap. It is a binding contract in which two people agree to make their wills in agreed terms and agree not to change them without the other's consent. Once one party has died relying on the agreement, the survivor is bound: if they try to rewrite their will to defeat the agreed distribution, the intended beneficiaries have a legal basis to enforce the original terms. For blended families where the worry is "what happens after I'm gone and my spouse changes their mind," a mutual wills agreement provides the certainty an ordinary pair of wills cannot.
Conditional gifts and alternate beneficiaries
A conditional gift makes a beneficiary's inheritance contingent on meeting a condition — completing a degree, for example, or using funds to start a business. Conditions can express a testator's values, but they have to be drafted carefully and paired with a clear alternate beneficiary, so that if the condition is not met the gift redirects cleanly rather than falling into intestacy. Naming alternate beneficiaries throughout a will — for the case where a primary beneficiary dies first or cannot meet a condition — is good practice regardless of whether conditions are used.
Choosing among the tools
None of these tools is right for every estate. A discretionary testamentary trust suits young or vulnerable beneficiaries; a Henson trust is specific to a disabled beneficiary on benefits; a life estate balances a second spouse against first-marriage children; a mutual wills agreement protects an agreed distribution from being unwound after the first death. Many blended-family plans use several at once. The starting point is always the family's actual situation and objectives, not the mechanics — and because trust law and benefits law vary by province, the chosen tool has to be drafted to the right jurisdiction.
These techniques sit on top of a valid will — see what makes a will valid in Canada — and interact with the tax rules that apply on death, covered in our tax planning at death guide. For business-owning families, our business succession and estate freeze guides cover freezes and family trusts. More terminology is defined in the glossary.
This guide draws on Dale Barrett's book "Wills, POAs & Estate Planning for Canadians" (Barrett Publishing, 2024). Estate, probate, and succession law differ by province and territory and change over time; this article is general information, not legal advice for your situation.