Protection and ongoing care for those who need it the most.
We all know it is wise to plan ahead by preparing a Will, Power of Attorney and Enduring Guardianship, but some of us may not realise that this applies to all of us, even those with a disability.
Another way to provide security for a person with a significant disability is to set up a Special Disability Trust. This can be done in consultation with both your financial advisor and solicitor.
What is a Special Disability Trust (SDT)?
A Special Disability Trust is a trust set up to assist families to make private financial provision for the current and future care, and accommodation needs of a family member with a severe disability.
The purpose of the trust is to look after and protect the interests of the beneficiary, or person with a severe disability. Expenditure from the trust is restricted to primarily those which are deemed reasonable to care for the needs of the person with a severe disability and to cover the costs of administering the trust.
What are the Benefits of a Special Disability Trust?
The benefits include:
- The beneficiary of the trust can have an asset value limit up to $669,750 (indexed annually on July 1) plus a primary residence as assets in the trust, which are exempt from the Social Security assets test for income support payments.
- Assets above the limit are added to the assessable assets of the principal beneficiary.
- Immediate family members gifting up to $500,000 to a complying Special Disability Trust may receive an exemption from the usual gift giving rules and can assist with their own eligibility to receive Social Security benefits and payments.
What are the Criteria to be the Principal Beneficiary of a Special Disability Trust?
The beneficiary of the Special Disability Trust will need to be assessed by Centrelink as being “severely disabled”. This can be a severe physical, behavioural, psychiatric disability or a severe medical condition. The trust cannot be established unless the beneficiary has met the criteria for the Centrelink eligibility test. This assessment will need to be carried out & results certified in advance of the trust being set up. There is a criteria for those over the age of 16 and a separate one for those under the age of 16. This criteria can be accessed by visiting: https://www.dva.gov.au/factsheet-is163-special-disability-trust
How can the Special Disability Trust be used?
The trust is available to be used for:
- Reasonable accommodation for the person with a disability
- Care costs arising from the disability
- Medical expenses including dental and membership to a private health fund
- Maintenance expenditure for trust assets
- Discretionary spending limited to $12,000 per financial year (indexed annually on July 1) on items not related to care and accommodation. This expenditure can be used for the health, well-being, recreation, independence and social inclusion of the principal beneficiary.
Who can be the trustee of a Special Disability Trust?
The trustee for a Special Disability Trust is not limited to an individual, it can also be a corporation. The individual or director of the corporation must:
- Be an Australian Citizen
- Not have been disqualified from managing corporations under the Corporations Act 2001
- Not have received a conviction for an offence under the Social Security Act 1991, or the Social Security (Administration) Act 1999, or the Veterans’ Entitlements Act 1986.
- Not have received a conviction for an offence or dishonest conduct under Commonwealth, state, territory or foreign country law.
- Complete a Statutory Declaration asserting that they have met all the above criteria
Special Disability Trust Requirements are:
- It must have a trust deed that contains the clauses as set out in the Model Trust Deed
- It must provide annual financial statements
- It must comply with the investment restrictions
- Be able to conduct independent audits as required
How Do I Create a Special Disability Trust?
If you have a member of your family that you would like to look at providing for, you can create a Special Disability Trust through your Will and it be set up from your estate, or it can be set up during your lifetime if you wish to take advantage of the gifting concessions.
Deciding if a Special Disability Trust is the right thing for your circumstances, will require a great deal of thought and should be done in consultation with your legal and financial advisors. A trust like this will be of most benefit to a beneficiary who will need to rely on the special disability support pension and the amount to be gifted exceeds the asset test limits.
There are ongoing reports and obligations for Special Disability Trusts, so please take care in appointing a trustee who is experienced in this area.
Special Disability Trusts are a wonderful way to be confident your loved one with a significant disability will be cared for into the future.
ConnectAbility Australia is a registered NDIS provider who can assist people with in-home personal care and domestic assistance, shopping and meal preparation, assistance with medication management and social supports. To learn more about their wide selection of services please go to: https://www.connectability.org.au/services/