What is a Special Disability Trust and why might one be beneficial for my family?

Wills, Estates & Succession Planning 13 May 2019

A Special Disability Trust (SDT) is a Trust which can be established for the benefit of a person who has a “severe disability or medical condition”.  An immediate family member or carer can establish an SDT (for the benefit of a person diagnosed with a severe disability or medical condition) while they are alive or under the terms of their Will.

SDTs receive pension and taxation concessions which would not otherwise be available if the assets were personally gifted to, or inherited by, the person suffering from the disability or condition.

A person may be eligible for an SDT:

Where the person has attained the age of 16 years:

  • They suffer from a disability;
  • They are unable to work more than seven hours per week;
  • Their level of impairment would qualify them for a Disability Support or Department of Veterans’ Affairs Pension; and
  • The disability would, if the person had a sole carer, qualify the carer for a Carer Payment or Allowance or they are living in a facility or group home where Commonwealth, State or Territory funded care is provided under a funding agreement.

Where the person has not attained the age of 16 years:

  • They suffer from a severe disability or medical condition;
  • They have a carer with a qualifying rating of “intense” under the Disability Care Load Assessment Determination;
  • Their treating health professional has certified in writing that they will require care for more than six months and, resultantly, that care is required to be provided by a specific number of practitioners;
  • Their carer has certified in writing that they anticipate the person’s care level will need to be maintained or increased in the future.

It may be beneficial to establish an SDT during one’s lifetime so assets can be gifted to the SDT during their lifetime, taking advantage of tax concessions on the gifting of such assets (up to the value of $500,000.00).  Establishing an SDT during one’s lifetime also ensures the assets are held by the Trust and therefore do not fall within the assets test of the person with the disability or condition, thereby preserving their pension.

Where the person suffering from the disability or condition is quite young and they are unlikely to receive significant assets for some time, there may be little benefit in establishing an SDT during their lifetime.  Instead, an SDT can be established under the terms of someone’s Will (ordinarily a parent’s Will), thereby ensuring assets they inherit at a future time are not inherited personally.  This ensures any pension they may be in receipt of at that future time can be maintained at the same level.

An SDT must have only one beneficiary, being the person suffering from the disability or condition, and can only be established by an immediate family member (i.e. parents, guardians, grandparents and siblings) or a carer.  The assets held by the SDT are intended to be applied towards the ongoing and reasonable care and accommodation expenses of the beneficiary and the appropriate management of the SDT, and the funds held therein, can be guaranteed by selecting an appropriate and trusted Trustee (i.e. “controller”) for the Trust.

At Coulter Roache, we understand that laws change regularly and as such, the definitions and eligibility criteria for an SDT are likely to change over time.  We prepare our Wills, SDTs and Trust Deeds by anticipating these changes and ensuring documentation is adaptable regardless of changing laws.

We also acknowledge that a person’s circumstances may change over time and we build mechanisms into our Wills to ensure if an SDT is not appropriate or a person is not eligible for an SDT at a future time, assets continue to pass to beneficiaries (particularly those suffering from a disability or condition) in a tax effective way, and those assets are appropriately managed by people you choose and trust.

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If you have ever wondered if there is a better way to provide for a child or loved one suffering from a disability or condition, either after your death or during that person’s lifetime, contact one of our expert lawyers. 

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