What is a Special Disability Trust?
Make an enquiry about setting up a Special Disability Trust.
We encourage people with a disability, who have the capacity, to plan ahead by preparing a Will, Power of Attorney and Enduring Guardianship. There is another way to plan ahead, especially if you are the friend or family member of someone that is severely disabled.
Special Disability Trusts provide for the current and future care and accommodation needs of a family member with severe disability. Special Disability Trusts are a relatively recent addition to trusts and NSW Trustee & Guardian have specialist expertise in this area, having being closely involved with the federal government throughout their development and implementation.
Benefits of a Special Disability Trust
The benefits of a Special Disability Trust include:
• Family members gifting assets up to $500,000 to the Trust may receive an exemption from the usual gifting rules which could assist their own eligibility to social security benefits.
• The beneficiary of the Trust can have up to $596,500 (as at July 2013, indexed each year) plus a residence as assets in the Trust, which are exempt from the social security assets test.
Who can be a beneficiary?
The person who is to benefit from the special disability trust must be assessed by Centrelink as ‘severely disabled’. The disability criteria can be severe physical, intellectual, psychiatric or behavioural disability or medical condition.
As a disability trust cannot be established unless the beneficiary has met the strict Centrelink eligibility test, it is important that this assessment is carried out first.
What can the trust be used for?
A special disability trust can only be used for limited purposes, which include:
• reasonable accommodation for the person with the disability
• care costs arising from the disability
• medical expenses (including health insurance)
• maintenance expenses on the trust assets
• discretionary spending currently limited to $10,750 in a financial year
Who can create or gift to a Special Disability Trust?
The person intended to be the beneficiary of the Trust cannot create the Trust themselves, nor can they gift their own assets into it. In certain circumstances, it may be possible for an intended beneficiary to have their share in a deceased estate used to create a Special Disability Trust.
Apart from the beneficiary, anyone can gift assets to a Special Disability Trust. But only immediate family members will be eligible for Centrelink Social Security means tests or gifting rule exemptions.
Is a Special Disability Trust the right option?
Whether a Special Disability Trust is right for your situation requires careful consideration of the circumstances of those intending to gift to the Trust and the proposed beneficiary. Ideally, it should be considered as part of a broad estate plan together with a Will.
A Special Disability Trust is likely to be of most benefit where the beneficiary relies on the special disability support pension and the amount intended to be gifted to the trust exceeds the asset test limits.
It is important to consult with a financial advisor and obtain specialist legal advice when deciding whether to set up a trust.
How to create a Special Disability Trust
If you have a family member you wish to provide for, you can create a Special Disability Trust through your Will so that it is set up on your death from your estate assets.
If the gifting concessions may be of benefit to your circumstances, you can consider creating a Special Disability Trust during your lifetime. The Trust is created using a Model Special Disability Trust Deed (prescribed by social security rules).
There are ongoing reporting obligations for Special Disability Trusts which make it especially important that you appoint a Trustee with expertise in this area.