WHAT IS A SPECIAL DISABILITY TRUST?
A Special Disability Trust is a special type of trust that is created for someone who has a registered disability or who has special needs.
It is designed to ensure that a person with needs can access money or income that has been set aside in the trust without them losing social security benefits.
HOW DOES A SPECIAL DISABILITY TRUST WORK?
A Special Disability Trust can be created either through a person’s will or by a special deed.
A Special Disability Trust that is created by a will come into effect upon the date of the death of the testator. A Special Disability Trust that is created by deed will come into effect when the deed either is executed or as provided for under the deed.
A Special Disability Trust:
- can only have one principal beneficiary (the person with the special disability);
- can only be created where the beneficiary has met the eligible criteria;
- can provide for the accommodation and care needs;
- must contain clauses as set out in the model trust deed;
- have an independent trustee, or have more than one trustee;
- provide annual financial statements; and
- have independent audits.
WHO IS ELIGIBLE TO BE A BENEFICIARY UNDER A SPECIAL DISABILITY TRUST?
Any person can be a beneficiary under a special disability trust if they have a severe disability. The definition of a sever disability is:
a) a person who has reached the age of sixteen (16) years of age:
- whose level of impairment would qualify the person for the Disability Support Pension or who is already receiving a Department of Veteran’s Affairs (DVA) Invalidity Service Pension or DVA Invalidity Income Support Supplement;
- who has a disability that would, if the person had a sole carer, qualify the carer for Carer Payment or Carer Allowance; and
- who has a disability and is unable to work more than seven hours a week in the open labour market.
b) a child under 16 years of age:
- who is a person with a severe disability or a severe medical condition;
- who has a carer who has been given a qualifying rating of ‘intense’ under the Disability Care Load Assessment (Child) Determination for caring for that person;
- who has had a treating health professional certify in writing that, because of the disability they will need personal care for six months or more and the care is required to be provided a specified number of persons.
HOW MUCH MONEY CAN I PUT IN THE SPECIAL DISABILITY TRUST?
There is a limit as to how much money can be placed in the special disability trust. This limit is known as the concessional asset value limit.
This limit was initially set at $500,000.00 on 20 September 2006. The limit as of 1 July 2018 is $694,000.00.
In addition:
a) where a beneficiary has assets that are above the concessional asset value limit, the amount of assets above the concessional value limit will be included in the assessment of assets;
b) the primary residence of the beneficiary if owned by the Special Disability Trust is an exempt asset and will not be included in the assessable assets of the trust;
c) no income of, or distributions from, the special disability trust are assessable under the social security income test but income from a Special Disability Trust will be taxed in the usual way;
d) on the death of the beneficiary, a special disability trust will terminate, and the assets will vest in the residual beneficiaries named in the trust deed; and
e) with regards to land tax on the home of the beneficiary, if the home is owned by a special disability trust, then generally companies and trustees that are normally not exempt from land tax receive an exemption (see Clause 11 of Schedule 1A of the Land Tax Management Act 1956 and section 3B of the Land Tax Management Act 1956).
WHO CAN CREATE A SPECIAL DISABILITY TRUST?
Anybody can create a special disability trust. It can be created by an individual through a will, a deed or it can be created by a corporation through a deed.
To protect the principal beneficiary, the current model trust deed requires at least two individual trustees, who can be friends and family, a company with at least two directors, or a single professional trustee, such as a legal practitioner or a trustee company.
HOW CAN THE FUNDS IN THE SPECIAL DISABILITY TRUST BE USED?
A trustee managing a Special Disability Trust can:
- pay for a beneficiaries medical and dental expenses;
- pay for the maintenance expenses on any assets held by the trust;
- spend up to $12,000 (2018-2019) on discretionary items not related to care and accommodation needs of the beneficiary (subject to legislative requirements).
An explanation of a Special Disability Trust can be found in the judgement of McMillian J extracted from Re Filippone [2019] VSC 219 at 16-25.
O’Brien Connors & Kennett remains operational and is still ready, willing and able to meet your legal needs. We are committed to ensuring the health and safety of all our clients and staff. The precautions recommended by the Australian government have been implemented and clients and staff are required to wear masks in face-to-face meetings. Please contact us if you require our services.
DISCLAIMER: The information contained in this article is general and is not intended to be advice on any matter. It is for information only and is not legal advice. In the event of a legal problem, you should seek legal advice.
