Special Disability Trust
What is a Special Disability Trust?
A Special Disability Trust is a trust established either by Deed or by Will. For the purposes of this information we are discussing a Special Disability Trust established by a Will.
It is a trust established for the benefit of one person whom suffers from an impairment or a disability. In general terms the trust is designed to provide a source of income whilst not adversely affecting an individual's entitlements to a disability pension.
This is of course provided that the trust meets the specific requirements of the Social Security Act 1991.
Who can be a beneficiary?
The trust can have only one beneficiary known as the principal beneficiary.
If the beneficiary is aged 16 years or older they must meet one of the following requirements in each of (1), (2) and (3) below:
1(a) Have an impairment that would qualify the person for a Disability Support Pension or;
1(b) Meet certain requirements under the Veteran's Entitlement Act; and
2(a) Have a disability that would, if the person had a sole carer, qualify the carer for carer payment or carer allowance; or
2(b) Be living in an institution, hostel or group home in which care is provided for people with disabilities and for which funding is provided (wholly or partly) by the Commonwealth or the State; and;
- The beneficiary must have a disability as a result of which either:
- He or she is not working, and has no likelihood of working for more than 7 hours a week for a wage that is at or above the relevant minimum wage; or
- He or she is working for wages set in accordance with the program administered by the commonwealth known as the supported wage system.
If the beneficiary is under 16 the following must apply:
- The principal beneficiary must be a person with a severe disability or severe medical condition; and
- Another person (the carer) has been given a qualifying rating of intense under the Disability Care Load Assessment (Child) Determination for caring for the principal beneficiary; and
- A treating health professional has certified in writing that, because of that disability or condition:
- The principal beneficiary will need personal care for 6 months or more; and
- The personal care is required to be provided by a specified number of persons.
- The carer has certified in writing that the principal beneficiary will require the same care or an increased level of care to be provided to him or her in the future.
It is important to note that a trust stops being a Special Disability Trust when the principal beneficiary dies and a trust is not a Special Disability Trust if the principal beneficiary at the time of its creation is a benefit of another Special Disability Trust.
What can the Special Disability Trust be used for?
The primary purpose of the trust during the lifetime with the principal beneficiary must be to meet reasonable care and accommodation needs of the beneficiary.
The trust may have other purposes that are both ancillary to the primary purpose and are primarily for the benefit of the principal beneficiary.
Who can be a trustee?
A trustee of a Special Disability Trust and therefore in general terms the executor of the estate must:
- Be an Australian resident; and
- Not have been convicted at any time of an offence of dishonest conduct; and
- Has not been disqualified at any time for managing corporations under Corporations Act 2001.
What restrictions are there on the use of funds?
A trust must not be used to pay an immediate family member or a child of the principal beneficiary for the provision of:
- Care services; or
- Services for the repair and maintenance of the beneficiaries' accommodation.
For this purpose an immediate family member includes a parent or stepparent, legal guardian, grandparent or sibling.
The funds must not be used to purchase or lease property from an immediate family member or a child of the principal beneficiary even if the property is to be used for the beneficiaries' accommodation.
What assets can be included in the trust?
Provided the total asset value of the trust is less than the prescribed limit (approximately $600,000.00 indexed annually) the assets of the Special Disability Trust are not to be included in the assets of the principal beneficiary or the trust for the purposes of asset calculations.
The value of any principal home of a principal beneficiary is exempt from the cap.
The trust must also not include compensation received by the primary beneficiary.
What specific requirements are there of the trust?
There are the following specific requirements set out by the Social Security Act 1999 being:
- The beneficiary requirements (section 1209M);
- The trust purpose requirements (section 1209N);
- The trust deed requirements (section 1209P);
- The trust deed requirements (section 1209Q);
- The trust property requirements (section 1209R);
- The trust expenditure requirements, if any (section 1209RA);
- The reporting requirements (section 1209S);
- The audit requirements (section 1209T).
It is important that all the trustees familiarise themselves with those sections.