Special Disability Trusts Provide Peace of Mind

Posted 03-03-2021
Written by admin 101

Caring for a child with a disability is an incredibly challenging for parents who continue to provide ongoing care for their child into adulthood. RMB Estate Planning lawyer Division explains the value of Special Disability Trusts:

A key consideration for parents of a disabled child is who will look after their child when they pass away.

Planning ahead for the disabled person’s future accommodation and living expenses requires a more comprehensive set of arrangements than what most basic Wills cover.

A potential option in certain situations is what is called a Special Disability Trust. Such a trust can established through a Will (meaning the trust is created after the parents pass away) or via a trust deed while they are alive.
Special Disability Trusts were enshrined in the Social Security legislation by the Howard Government in 2006 with the objective of helping families to provide their disabled beneficiaries with accommodation and funds from their estate.

A Special Disability Trust allows parents to leave inheritance for their child in a trust wherein the funds are protected for the future benefit of the beneficiary and can be used to pay for their accommodation, ongoing care, medical expenses and some discretionary spending as well. A key advantage is that the beneficiary’s inheritance will not impact on their entitlement to receive the disability support pension.

Like other testamentary trusts, they offer many advantages including tax concessions as well as gifting concessions. Once the trust has been established, contributions can be made by anyone at any time.

There are strict rules about the manner in which funds in a Special Disability Trust can be spent. The only purposes are for accommodation, health-related costs (including medical and health insurance expenses), and other expenses related to the disability; and discretionary expenditure (up to a limit of $12,500 a year (as at July 2020).

A person assessed has having a severe disability can receive $694,000 (as at July 2020, indexed annually) plus a residence held in trust before the Centrelink assets test applies. The income test does not apply at all to the income of the trust. Family members such as grandparents placing assets of up to $500,000 into such a trust may receive an exemption from the usual gifting rules applying to pensioners.

It is important to obtain expert financial and legal advice to determine if such a trust is appropriate and will be beneficial for the disabled person. If you would like to speak to a lawyer who specialises in Special Disability Trusts, please contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.