special disability trusts

A special disability trust is a trust established for the benefit of a person with a disability or medical condition.

A special disability trust can be created immediately by a trust deed, but it is more commonly used for estate planning by parents and immediate family members for the future care and accommodation needs of a person with a disability.

Yes, provision for a special disability trust can be included in a will – but it does not come into effect until after the death of the willmaker. 

Often, the parents of a person with a disability do not have sufficient funds to establish a special disability trust during their lifetime. Including the option for a special disability trust in their will enables their executors to consider the most effective trust vehicles available at the time of their death.

The beneficiary and their spouse cannot contribute their own funds into the special disability unless:- 

  • the asset is a gift from a will or a superannuation death benefit that was paid into the trust within 3 years, or
  • was compensation received by or on behalf of the beneficiary

To be eligible to be a beneficiary, the disabled person must meet the definition of ‘severe disability’ under the Social Security Act 1991.

If the person is over 16 years of age, to meet the definition of severe disability, the person:-

  • is qualified for the disability support pension or Department of Veteran Affairs Invalidity pension or supplement, or
  • if the person’s carer would qualify for the carer payment or carer allowance
  • lives in an institution, hostel or group home

and

  • is not able to work because of their disability or not working for more than 7 hours per week

For a child under 16 years of age,  the person:-

  • has a severe disability or medical condition; and
  • has a carer rating of ‘intense’ under the Disability Care Load Assessment (Child) Determination; and
  • a treating health profession has certified that the child will need personal care for more than 6 months

The Department of Human Services’ Special Disability Trust team can assess the proposed beneficiary’s eligibility for a special disability trust before a trust is set up for their benefit.

A trustee can be an individual or a corporation, including accountants, solicitors, corporate trustees and The Public Trustee.

There must be at least two trustees appointed, unless the trustee is a professional corporate trustee or the Public Trustee.

The following information is contained in Booklet: Special Disability Trusts – Questions & Answers by the Department of Human Services

The trustee’s responsibility is to act in the best interests of the beneficiary in accordance with the terms of the trust, through provisions in the trust deed or will.

In brief, the duties of the trustee are:

  • to implement the trust in accordance with its terms,
  • to consider whether to spend trust money or otherwise use the trust property for the benefit of the beneficiary, with reasonable regularity,
  • to invest trust property prudently and in accordance with the directions contained in the trust,
  • to avoid unnecessary expense or waste of trust property,
  • to take professional advice (legal, financial, accounting, medical or other advice) if required (at the expense of the trust),
  • to keep accounts of assets and liabilities and income and expenditure and be ready to account to the beneficiary if required, and
  • if the trust is relevant to the income support entitlements of the beneficiary, to provide information to the Department of Human Services or the Department of Veterans’ Affairs as required.

Trustees have the right to have their reasonable trust-related expenses paid from the trust.

There is a legal obligation on the trustee to look after the trust property, and invest it and use it wisely and carefully for the benefit of the beneficiary.

The trustee must:

  • keep or cause to be kept proper accounts in respect of all receipts and payments on account of the trust fund and all dealings connected with the trust fund, and
  • prepare or cause to be prepared written financial statements showing the financial position of the trust at the end of that accounting period.

The trustee must provide the financial statements of the trust and action audits when/if requested.

Anyone can contribute to a special disability trust, except the disabled beneficiary and their partner, can contribute to the special disability trust.

Only immediate family qualify for the special gifting concession.

Normally, if a person receives a pension, they can only gift a certain amount per year (currently $10,000) to a certain amount (currently $30,000) over a rolling 5 year period, before the gifts affect their pension.

Immediate family members of the beneficiary who receive a pension, and contribute to the special disability trust during their lifetime, may be eligible for a gifting concession (currently up to $500,000).

There are complicated rules in relation to gifting concessions and it is recommended that anyone contemplating contributing to a special disability trust discuss their situation with Centrelink.